Draft NCC Statement of Accounts 2018-19 · The draft, unaudited accounts were issued 13 September...

1

Draft

Statement of Accounts

2018-19

The draft, unaudited accounts were issued 13 September 2019

2

Contents

Introduction 3

Narrative Statement 3

Statement of Responsibilities 23

Independent Auditor’s Report 25

General Information 29

The Core Statements 36

- Comprehensive Income and Expenditure Statement 37

- Balance Sheet 38

- Movement in Reserves Statement 39

- Expenditure and Funding Analysis 40

- Cash Flow Statement 41

Notes to the Core Statements 43

Appendices 95

Full set of Accounting Policies 96

Northamptonshire Local Government Pension Scheme Accounts 119

Glossary 155

3

Introduction

This document presents the statutory financial statements for Northamptonshire County Council (the

Council) for the period 1 April 2018 to 31 March 2019 and gives a comprehensive summary of its overall

financial position.

The accounts are presented in the format recommended by the Chartered Institute of Public Finance

and Accountancy (CIPFA), as set out in the Code of Practice on Local Authority Accounting in the

United Kingdom 2018-19 (the Code). The core financial statements use this format and meet the

conditions of the Code.

Narrative Statement 2018-19

In many ways, Northamptonshire County Council does not stand out from the crowd. It is a medium

sized council with a population of 733,000 (ONS 2016). The proportion of people aged 65 and over is

expected to increase in line with the national average in the next 10-20 years. Life expectancy is

around the national average. Overall the County has a low level of deprivation although some

pockets are a cause for concern with below average earnings and skill level. With regard to health

deprivation and disability, Northamptonshire is in the second-best quartile, 94th out of 152 upper tier

authorities. It does, however, have a faster growing population than other County Councils. In the last

30 years the population of Northamptonshire has increased by just over 30% compared to a national

average increase of 16.8%.

However the Council did stand out from the crowd with regard to the management of its finances.

Given the unique position the Council found itself in, this narrative has been expanded this year to

provide commentary on the background which led to this situation and explains some of the

subsequent events and activities that took place in the year to start on the road to recovery

The Council’s Priorities - Our Vision for Northamptonshire

The Council Plan for 2018-2022 set out the vision for the county where we all look after each other and

take responsibility, where the vulnerable are protected and supported and where the people who

cannot help themselves receive the assistance they need to stay independent and healthy. Making

Northamptonshire a great place to grow up, live, learn, work and grow old. The achievement of this

vision is dependent on a new relationship between residents and public services, a two-way

relationship with clear expectations and responsibilities. This is a new conversation we are entering

with the public, in full knowledge that sustainability of public services can only be achieved with

everyones participation. The Council’s role in this vision is articulated as:

Our first priority must be to meet our statutory duties and to safeguard vulnerable residents and

communities. We will continue to focus on delivering targeted early help to avoid needs growing

and becoming acute;

We want this medium term to not only be about surviving but thriving, and also laying the

foundation for a more sustainable future. We can only achieve this by maximising and

progressing the opportunities by working more strategically and forging partnerships;

4

Over the medium term, we want to move towards becoming a more strategically enabling and

facilitating Council, working with others to deliver services better targeted at those who need

them most, and continuing to safeguard those who are vulnerable to abuse or neglect. As a

strategic influencer and facilitator, we can take an active role in promoting and advocating the

case of the county, regionally and nationally.

The Council’s Financial Position

Historically Northamptonshire has had a lower tax base than the average for all County Councils.

Northamptonshire’s spending levels have been lower quartile for the majority of services with the

exception of Children’s Services where spending is the second highest of all County Councils.

There is no doubt that the reduction in funding for local government since 2009/10 has made an impact on the provision of services. The National Audit Office (NAO) has published data outlining that local government funding over the period has reduced by 49.1% in real terms since 2010-11. This has had an impact on services as a result, as local authorities two main funding streams (Council Tax and Central Government Funding) have reduced by 28.6% in real terms since 2010-11. The effect of these reductions in funding has been amplified in Northamptonshire for two main reasons. Firstly, the Council has for many years had one of the lowest levels of Council Tax when compared with other County Councils and this has reduced the level of funding generated locally. Secondly, the growth rate in population has been significantly above the national average growth rate at a time when the national government funding formula has continued to use historic population data for distributing funding between local authorities. This has meant that Northamptonshire has not only had less government funding, it has also had more people for whom services need to be provided. These funding reductions are part of the context. Nonetheless, other local authorities have faced similar reductions and have coped better than Northamptonshire, typically by taking measures promptly to reduce expenditure and to increase income from other sources. The principal failing, therefore, has been one of leadership and decision-making within Northamptonshire at the most senior levels. Concerns about the Council’s performance began in earnest in 2013 when an Ofsted inspection resulted in an ‘Inadequate’ rating. Over the next few years the Council continued to underperform in key service areas. ‘Adverse’ value for money opinions by the external auditor in relation to the 2015-16 and 2016-17 accounts, together with feedback on services, led to the Local Government Association undertaking a peer review. At the Council’s request the review covered financial planning and management. Shortly after this, in November 2017, the Chief Executive left the organisation and an interim Chief Executive was appointed. Having been made aware of the outcome of the LGA peer challenge, the Secretary of State for MHCLG appointed an Inspector to investigate concerns about financial management and governance at Northamptonshire County Council (NCC) and to consider whether the authority was failing in its duty to deliver ‘best value’. The best value duty was introduced in England and Wales by the Local Government Act 1999. Its provisions came into force in April 2000. The aim was to improve local services in terms of both cost and quality. A best value authority must make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness (section 3(1) of the Local Government Act 1999). Under section 10 of the Local Government Act 1999, the Secretary of State may appoint a person to carry out an inspection of an authority’s compliance with the best value requirements in relation to specified functions.

http://www.legislation.gov.uk/ukpga/1999/27/contents

http://www.legislation.gov.uk/ukpga/1999/27/section/3



5

Some of the milestones in Northamptonshire County Council’s more recent history as follows:

The Secretary of State appoints an independent Inspector – January 2018

The Secretary of State appointed Max Caller CBE to provide a report on the authority’s corporate governance and financial management systems. The Inspector was required to report his findings by March 2018. Caller’s report, published on 16 March concluded that NCC had failed to comply with its duty under the Local Government Act 1999 to provide best value in the delivery of its services. The failure was widespread and entrenched, although as Caller noted, it was not the fault of ‘the many good, hardworking, dedicated staff who are trying to deliver essential services to residents who need and value what is offered and available’. The Northamptonshire Chief Executive left the Council in November 2017, shortly after the finance peer challenge conducted by the LGA. An interim Chief Executive was appointed. The report also advised that the only way to rebuild confidence and quality in the local authority would be to start afresh through reforming local government. The report proposed creating two new unitary councils for Northamptonshire, in place of the existing County Council and seven district and borough councils: a major transformation in the way that local government services are organised throughout the county. The recommendation was to move swiftly on this proposal, with the new councils to be in operation following elections in May 2020 (the Secretary of State later approved a vesting day of April 2021).

KPMG challenges the legality of the 2018-19 budget and issues an advisory notice under the Local Audit and Accountability Act – 20 February 2018

KPMG took the extraordinary step of issuing an advisory notice to NCC ‘on the basis that the authority had begun to take a course of action which, if followed to its conclusion, would be unlawful and likely to cause a loss or deficiency’. This advisory notice was issued by KPMG so as to meet its statutory responsibilities under paragraph 1 (1) (b) of Schedule 8 to the Local Audit and Accountability Act 2014. This advisory notice was the first to be issued by a statutory auditor to a local authority in England, and subsequently KPMG have decided to issue a Report in the Public Interest.

The Chief Finance Officer issues the first Section 114 Notice – February 2018

Under Section 114 of the Local Government Act 1988, the Chief Finance Officer has a duty to make a report if it appears that the authority has made, or is about to make, a decision that may involve the authority incurring expenditure that would be unlawful and lead to a loss or deficiency. In addition, the Chief Finance Officer has a duty to report if the expenditure incurred by an authority is likely to exceed the resources (including sums borrowed) available to it to meet that expenditure. In February 2018 the Chief Finance Officer issued a Section 114 Notice highlighting the Council’s perilous financial position. At the time this was not supported by a clear plan of remedial action, hence it did not prompt the change in behaviour across the Council that was intended. The financial problems continued to grow.

6

The findings of the best value review led to the Secretary of State issuing Directions to intervene - March 2018

Two Commissioners for Northamptonshire County Council were appointed by the Secretary of State on 27 March 2018: a Lead Commissioner to focus primarily on governance and scrutiny and a Finance Commissioner to work closely with the Authority on strategic financial planning and budgetary control. The intervention of Commissioners in the powers of an English local authority is a rare occurrence and is regarded as a last resort, not least because it severs the thread of local democratic accountability between Councillors and the electorate. Local councils are run by Members who are democratically elected by local people to take decisions about local public services and Council Tax levels on their behalf. Members are accountable to local people for the decisions they take and can be voted out of office if local people so choose. In contrast, Commissioners are appointed by the Secretary of State; local electors have no say in their appointment and yet Commissioners have wide-ranging powers that affect how local services are provided. To date there have been only seven interventions under the 1999 Act. However, Northamptonshire stands alone as the only authority where its financial deficit and failings in financial systems, control, management and stewardship are amongst the primary reasons for the Secretary of State’s intervention. It is completely unprecedented for a council to be in financial deficit and disarray on the scale faced by NCC and for an inspector to ask the Secretary of State to give serious consideration to Commissioners taking over the running of the Council. Other key reasons for the intervention include poor corporate governance and debilitating weaknesses in managerial and political leadership. Northamptonshire County Council has suffered from extraordinarily high staff turnover at the most senior level. This instability has had a debilitating effect in some key areas of service delivery. The Council has had:

four Chief Executives in a period of eight months between November 2017 and July 2018

four Directors/Acting Directors of Children’s Services in less than 12 months prior to January 2019

three Directors/Acting Directors of Place in the two years prior to March 2019

four Section 151 Officers/ Acting Section 151 Officers in the two years prior to October 2018 High levels of staff turnover have also been experienced in key service areas, not least Children’s Social Services. Such high turnover has not been helped by the County Council’s decision a number of years ago to opt out of National Joint Council terms and conditions.

Commissioners establish priorities for the intervention – May 2018

Commissioners arrived at NCC on 16 May 2018 with specific responsibilities for finance, governance and scrutiny. The Secretary of State also appointed a Chief of Staff for Commissioners, a highly experienced civil servant from MHCLG to work with the Commissioners and provide a direct link back to him. Three areas were quickly established as priorities: the recovery of the financial position, the re-creation of a corporate centre, and engagement with partners and residents. Commissioners began the work necessary to transform financial systems, financial management, governance and service delivery at Northamptonshire County Council.

7

Commissioners were clear that delivering those priorities and stabilising Northamptonshire County Council would depend upon establishing effective relationships and encouraging collective effort. All parties needed to pull together if progress was to be made and sustained in solving seemingly intractable problems. Commissioners also made clear their commitment to working with (as opposed to directing) the County Council, in the public interest, to help place its finances and its services in the best possible position ahead of any decisions about the reorganisation of local government in Northamptonshire. Commissioners decided to adopt a practice of supporting the County Council by minimising the use of their powers of direction, provided that sufficient progress is being made by the Council under the direction of the Leader and Chief Executive. This approach means that changes made by the Authority are more likely to be sustained once the work of the Commissioners is finished. Early on in the intervention, the Commissioners reported on significant weaknesses in the integrity of the financial processes associated with a new resource system that had been implemented by Local Government Shared Services (LGSS), a shared service arrangement between NCC, Cambridgeshire County Council and Milton Keynes Council. The Commissioners requested an independent review of LGSS as a matter of urgency. Significantly, NCC’s strategic finance team was located within LGSS together with Democratic Services. The Commissioners instructed these functions to be transferred back to Northamptonshire with immediate effect so that the task of rebuilding a corporate centre could begin. At this stage they reserved judgement about whether further transfers of activities and staff would be necessary, for example Human Resources, Strategic Information and Communications Technology (ICT).

Commissioners take immediate action to recover the financial position - July 2018

With the external auditor and the Best Value Inspector having expressed serious reservations about the culture within which financial information was prepared and managed at NCC, and given concerns about the quality of that information, the Commissioners appointed the Chartered Institute of Public Finance and Accountancy (CIPFA) to provide an analysis of the true financial position and to make a critical assessment of the financial management arrangements in the County Council. The CIPFA analysis exposed a financial situation that was considerably worse than the Council had expected, demonstrating the lack of grip the Council had on its finances. CIPFA concluded that there was an estimated unfunded deficit of £64.4m in 2018-19. A second Section 114 Notice was issued by the County Council’s Chief Financial Officer on 24 July 2018, with the full support of the Commissioners, declaring the estimated unfunded deficit at £64.4m After further work, the main elements of the financial crisis were set out as follows:

• An estimated deficit of £35m for 2017-18 • An in-year shortfall of £30m for 2018-19 (and a budgeted savings target of £35.4m) • A projected shortfall for 2019/20 of £60m

Moreover, the authority was obliged to deliver the lion’s share of its in-year savings targets of £35.4m or the situation would worsen. The Commissioners noted that ‘this is unprecedented in local government… Whilst we can, and will, take such action as is necessary to restore the Council’s finances to an ongoing operating balance, the requirement to find further savings to neutralise the historic deficit represents an extraordinary challenge. Considered against the concomitant need to

8

maintain the integrity of critical public service delivery, it is a challenge that is beyond being met in a single year… but in light of potential reorganisation of local government in Northamptonshire the option to reduce the deficit over a number of years is not available’. Another pressing issue was the Council’s existing medium-term financial plan (MTFP) in which the Commissioners had expressed no confidence. Urgent work was needed to prepare a budget for 2019-20 and a robust and realistic MTFP. In addition, the monthly cycle of financial monitoring needed rapid improvement. Given the scale of the agenda, the Commissioners procured additional on-going independent financial advice and support.

The Centre for Public Scrutiny appointed to work with Members to develop an effective approach to scrutiny

Self-evident weaknesses in scrutiny resulted in a complete restructure to a single Scrutiny Committee whose sole remit is to support the Council’s recovery activity with a clear focus on financial management Through the Local Government Association, the Centre for Public Scrutiny was appointed to develop, implement and play an active part in embedding this new approach in the Council’s standard operating practices. Relationship and capacity building have been central to the new approach. There is an emphasis on the modelling of mature, professional conduct to encourage constructive interaction. Members and officers were offered refresher training on the code of conduct. Scrutiny meetings have become more purposeful and have clear outcomes, with members and officers working more effectively across professional boundaries.

The Council approves significant savings proposals set out in a Stabilisation Plan – October 2018

The Council’s extraordinary financial position crystallised as follows:

a year-end deficit for 2017-18 of £41.5m

a projected overspend in the current year 2018-19 of £30m, and

the need to set a budget for 2019-20 which had an anticipate funding gap of around £60m. Some well-managed and systematic corrective action was called for. Commissioners worked with the leadership team and Cabinet to produce and approve a Stabilisation Plan. The purpose of the Stabilisation Plan was to help turn around the Council’s financial position and move towards balancing the budget in 2018-19. To the credit of the Council’s leadership team and Cabinet, towards the end of 2018 there had been a remarkable turnaround in the financial position at Northamptonshire County Council. At that time the Commissioners noted in their report to the Secretary of State that ‘for the Council to be on the cusp of realising a balanced position between income and expenditure in 2018-19 without the use of any extraordinary support or exotic accounting solutions is a significant achievement’. However, the Council was still facing major challenges in providing key services efficiently and effectively, not least Children’s Services.

Appointment of a Children’s Commissioner – October 2018

Growing concerns by the Commissioners reinforced by feedback from an Ofsted focussed visit led to a request to expand the intervention arrangements. The Secretary of State for Education appointed a

9

Children’s Commissioner with responsibility for identifying improvement priorities in this area, and for recommending any alternative delivery vehicle that he believed would more readily secure safe and sustainable Children’s Services in the county. In respect of the latter, the decision to establish a Children’s Trust by July 2020 was issued on 10 June 2019. The Commissioners will continue to work with the Children’s Commissioner in order to bring this about as quickly and efficiently as possible. In the light of the difficulties facing Children’s Services, and of those facing the Council as a whole, separating these points of focus will assist in addressing both, and doing so at the earliest opportunity will be better for all of those who receive these services. With respect to making improvement in Children’s Services, Commissioners identified in the considerations on budget monitoring some of the emerging challenges. The Children’s Commissioner made comprehensively clear the extent of the problem in his report to the Secretary of State for Housing, Communities and Local Government, and the Secretary of State for Education in May 2019 –‘Optimum delivery and governance arrangements; children’s services in Northamptonshire’. It is evident from this report that there will be a need for financial support beyond that originally budgeted for, in order to make progress on the priority actions that he identified in December and which the Council has accepted. This support will be in addition to whatever may prove necessary to meet the additional demand pressures that the Service is identifying. The necessary improvements in Children’s Services will be funded and supported without undue destabilisation of the Council’s wider expenditure plans. The work of the Commissioner for Children’s Services started in November 2018 and was focussed on two main elements: securing immediate improvement in children’s social care services and bringing together views on the optimum delivery and governance arrangements for the future. As of June 2019 the service remains fragile; much of the inadequate performance across the service is long standing, embedded and systemic and will take considerable time to redress. For example, the legacy of a poor approach to workforce attraction and retention is an over-reliance on inexperienced newly qualified social workers and expensive temporary agency staff. Despite these challenges, the Council has been making progress.

Positive milestones on the road to financial recovery

Key milestones include: Capital Dispensation In November 2018 the Secretary of State approved a Capital Dispensation for £70m. This dispensation allowed the County Council to apply its own capital receipts (funds typically generated from the sale of land and property) to meet revenue expenditure. Ordinarily, local authorities cannot apply capital receipts to fund revenue expenditure in this way. The Capital Dispensation was applied in the following ways:

£41.5 to cover the deficit brought forward from 2017-18

£8.5m to cover savings of £8.5m identified in the Stabilisation Plan that could not be delivered until future years

£20m to create an unallocated General Fund reserve for 2019-20

10

Business rates Pilot The seven district and borough councils, together with the County Council, made a successful bid to be a business rates pilot area for 2019-20. This will mean that the county as a whole will benefit from additional funding of £21m for 2019-20. The new funding will help to improve and transform service delivery for people in Northamptonshire and will pave the way for a successful transition to two unitary council in 2010-21. Savings achieved During the course of 2018-19 the following savings were delivered:

£26.7m of planned savings were delivered against a savings target of £35.4m

Savings of £8.3m were delivered through the Stabilisation Plan

Savings of £8.7m were delivered from proposals identified by the leadership team in a budget workshop in January 2019

Savings of £26.2m were delivered by the leadership team, of which £8.5m was made through the application of capital receipts. The lion’s share of the savings in 2018-19 was achieved through efficiencies in service delivery, staff vacancy savings, use of contractual inflation, a balance sheet review and use of capital receipts.

Taken together, the delivery of these savings has resulted in an estimated outturn of a surplus of £4.5m.This has been achieved without the use of any extraordinary support, just nine months after the s114 Notice was issued predicting an overspend of £30m. This was over and above an already challenging savings target of £35.4m. 2019-29 Budget agreed Another milestone was reached with the setting of the 2019-20 budget by full Council, with the endorsement of Commissioners. The County Council set a savings target of £41.3m but, in contrast with previous years, the leadership team has identified a clear business case for the delivery of each of these savings. Furthermore, the business cases have been subject to careful scrutiny by the leadership team and the Transformation Board. In addition, there are some savings required to be delivered from prior years that increase the savings target for 2019-20 to £43m. Taken together with the creation of an unallocated General Fund Reserve of £20m for 2019-20 this represents an improvement of £38.7m from the position inherited by Commissioners, the strengthened leadership team and Cabinet. Nevertheless, the savings target is particularly challenging for a Council that has an operating base in which ingrained, often contractually bound, inefficiencies and poor systems remain built-in. Even at this early stage in the financial year the pressures to the delivery of the budget are presenting themselves, very noticeably so in Children’s Services, Adult Services and cross service savings. The period two (end of May) budget monitoring report estimates an over-spend of £5.8m. In addition there will be considerable expenditure required to deliver the children’s improvement plan which has recently been agreed by the Council’s Cabinet. For the Council to deliver a balanced budget it will therefore need to identify further savings in-year in order to mitigate these pressures. In response to these risks Commissioners requested:

1. An independent review of the children’s budget; 2. An enhanced budget monitoring exercise to be completed for the end of the first quarter

(June); and

11

3. Financial management for the whole Council to be assessed and an improvement plan developed.

Taken together, these measures will put the authority in a position of being able to identify the range of additional measures that will have to be put in place to ensure a balanced budget. Transformation and improvement will play their part, as will efficiency savings and strong expenditure control, but some service reconfiguration and reduction may have to be considered. Commissioners will strive to keep this to a minimum, given the need for service stability, and enhanced investment in some areas, in the run up to the creation of unitary authorities.

A summary of improvements of £151.8m in the County Council’s financial position in the first year of the intervention

Financial position at July 2018 (S.114 Notice)

Financial position at June 2019

Improvement in financial position at June 2019

Main factors contributing to the improvement

2017-18 A deficit of £35.3m rising to £41.5m after adjustment of reserves.

Balanced £41.5m The Secretary of State’s approval for NCC to apply capital receipts (£41.5m) to cover the deficit.

2018-19 An unplanned in-year deficit of £30m together with a budgeted savings target of £35.4m

A surplus of £4.5m. Savings of £26.7m delivered against original savings target of £35.4m. A Stabilisation Plan delivers £8.3m and closes the gap. Budget workshop, January 2019, delivers £8.7m in savings. Balance sheet review, contractual inflation provision, vacancy savings and other measures yield £26.2m

£69.9m

Concerted effort from leadership team and service managers to deliver savings and maintain financial control. Implementation of the Stabilisation Plan. The Secretary of State’s approval for NCC to apply capital receipts (£8.5m) this being:

£3.7m to address legacy issues relating to aged debt and LGSS Law

£4.8m to create a budget delivery reserve to deal with issues coming to light in 2019-20

2019-20 A projected deficit of £60m

A savings target of 43m and a revenue reserve created of £20m

£40.4m The Secretary of State’s approval for NCC to apply capital receipts (£20m) to create a General Fund reserve.

12

Outturn Position 2018-19

Spending against the budget has been monitored regularly throughout the year, and reported to each

of the Council’s Cabinet meetings. The final outturn position against budget for the 2018-19 financial

year, as reported to Cabinet on 9th July 2019, is set out in Table Two overleaf.

Table Two – Outturn position 2018-19

Outturn 2018-19 by

Directorate

Net

Budget

Net

Spend at

31/03/19

Outturn

Variance Estimated

variance in

s114 Notice

Movement in

variance.

at

31/03/19

(favourable) /

adverse

£'000 £'000 £'000 £'000 £'000

Chief Executive Services 7,374 6,845 (529) 1,445 (1,974)

Children First

Northamptonshire 121,898 119,077 (2,821) 1,873 (4,694)

LGSS 14,624 14,553 (71) 514 (585)

Northamptonshire Adult

Social Services (NASS) 184,007 177,981 (6,026) 5,820 (11,846)

Place Services 104,777 101,916 (2,861) 1,120 (3,981)

Wellbeing and Prevention 4,918 3,812 (1,106) 671 (1,777)

Corporate costs: Treasury,

Insurance and Technical

Services

3,675 (14,304) (17,979) (10,997) (6,982)

Shortfall on budgeted

transformational

expenditure 18-19

0 30,542 30,542 29,700 842

Total budgeted

expenditure 441,273 440,422 (851) 30,146 (30,997)

Less funding (441,273) (444,882) (3,609) 0 (3,609)

Net Outturn Position

2018-19 0 (4,460) (4,460) 30,146 (34,606)

2018-19 Performance and Financial Summary

There are a number of major access points into the Council for services and for advice or information.

These include the Customer Service Centre (CSC), the website (including e-forms) and the Children’s

Multi Agency Safeguarding Hub (MASH). The Council received over 160,000 calls and 17,500 e-

referrals for adult social care via the CSC over the course of the year, in addition the MASH received

more than 24,000 contacts.The Council looks to provide the option to engage with the public via the

website, whether it be for information or to make an e-referral to a service or pay for services online.

Our website received 6.9 million page views over the course of the year, 49.6% of users access our

website via a mobile or tablet. The most popular areas of our website remain broadly the same each

year with the school term dates area receiving the most visits (after the landing page) over the course

13

of the year, other high volume pages include school admissions, jobs and careers, the general contact-

us page, roadworks information and bus timetables.

The service performance of the Council is monitored through the quarterly Corporate Performance

Report which is presented to Cabinet on a quarterly basis, while the projected in-year financial position

is reported to Cabinet on a monthly basis.

Regular Financial and Performance Reporting

The service performance of the Council is monitored through the quarterly Corporate Performance

Report which is presented to Cabinet on a quarterly basis, while the projected in-year financial position

is reported to Cabinet on a monthly basis.

Transformation Stategy

The Council recognised the weaknesses in the way it delivered its change programmes in the past and addressed this by developing a fully resourced Transformation Strategy, which was approved by Full Council in November 2018. The strategy sets out the Council’s approach to transforming services, recognising the capability and the capacity required within the organisation to drive and support directorates with robust delivery methodology and strong governance. Key programmes of work integrated through strategic themes were developed to drive forward change and reduce the cost base to a sustainable level. This was to enable the Council to operate within its budget. The Transformation projects the Council delivered throughout the year are set out in the table below, and are funded through the flexible use of capital receipts. Table Four – Transformation Projects

Transformation Projects

Cost

2018-19 £000

Projects identified within Original Budget

1 Recruit permanent Social Workers, savings on agency costs by implementing an international recruitment programme

296

2 Reduce the number of agency staff through enabling their transfer into the Council’s staffing establishment

87

Projects identified and assessed since Budget Setting

3 Development and implementation of the Stabilisation Plan 17

4 Appointment of legal advisors who will deliver the renegotiation of the Shaw PFI contract

87

5 Fixed term external assignment to support the delivery of a Best Value review of Olympus Care Services

15

6 Costs associated with the proposed local government reorganisation in Northamptonshire

125

7 Voluntary redundancy costs associated with reducing the size of the workforce 1,547

Proposal drawn from Stabilisation Plan

8 A review of the pricing and delivery of Learning Disability services 11

9 Annual Cost of the Transformation Programme, as per Transformation Strategy 563

Total Approved November 2018 2,748

Additional qualifying projects subject to approval by Full Council in February 2019

14

10 Libraries Transformation Programme 87

11 Continuation of International Social Worker recruitment 0

Total 2,835

The development of these transformation projects were undertaken using project management

methodologies, with the planned outcome aligned to the Council’s transformation stategy and savings

delivery programme.These projects replaced the councils high level budget assumptions that resulted

in a shortfall on budgeted transformation expenditure of £31m, which formed part of the Council’s

overspend position.

Northamptonshire Adult Social Services (NASS)

An ageing population and increasing demands on adult social care is not an issue limited to our county,

but an issue for all councils with a social care responsibility. We also have a statutory duty to ensure

the care provided is safe and to a prescribed standards. Northamptonshire has 372 social care

providers operating in the county, of these 87.5% are providing high quality care for elderly and

vulnerable people operating at either Good or Outstanding assurance levels in their latest Care Quality

Commission inspection rating. NASS received more than 12,000 new requests for support in the

financial year, an increase of 1,500 from 2017-18, with 6,324 of these requests resulting in a service

of some kind, be it long term care, short term/ respite or some advice and information. NASS provided

services for a total of 9,650 clients throughout the year and at the end of March 2019 NASS was actively

providing services to 7,019 clients.

NASS, along with its partners, has worked hard on new initiatives and improvements to its existing

working over the past 12 months in order to address very high levels of Delayed Transfers of Care

(DTOC). This is when hospital patients are ready to be discharged but they not able to for a variety of

reasons. The number of bed days lost due to DTOC has decreased significantly in the past 12 months

over the autumn/ winter period and in comparison to the same point last year (see below). This is due

to better integrated working in hospitals and the dedicated work of our hospital discharge teams.

15

NASS’s final outturn position was an underspend of £6.0m. This underspend does not reflect the

financial cost of the demand pressures of providing high quality care for the elderly and vulnerable

people in Northamptonshire but more the range of managed robust financial controls and the impact

of the Stabilisation Plan the Council has enacted over the course of the financial year. Total pressures

of £18.1m above budget were seen in 2018-19 of which £11.6m related to direct care demand

pressures (both inflationary and demographic) with a further £4.9m related to the under delivery of

historical savings proposals, a proportion of which were outside the control of the Council. These

pressures have been built into the Council’s 2019/20 budget that was approved in February 2019

reflecting the recurrent nature of this demand.

A range of mitigating activities throughout the year totalled £19.8m, including service contingency

release (£4.4m), release of contract inflation due to improved commissioning activity (£3.5m), release

of sleep in provisions (£2.0m) due to changes in national case law and additional Adult Social Care

funding of £2.7m.The Council’s Stabilisation Plan also resulted in a positive underspend to NASS which

totalled £4.3m through a range of measured interventions.

Children First Northamptonshire (CFN)

In November 2018 the Lead Commissioner for Northamptonshire wrote to the Secretary of State for

Housing, Communities and Local Government and the Secretary of State for Education requesting

capacity within the Commissioner team, specifically to provide oversight of the Council’s Children’s

Services function. The Lead Commissioner raised concerns around the pace of improvement,

operational stability, overall performance and control of its finances.

In addition to this request Ofsted had also undertaken a focused visit, which looked at

Northamptonshire’s arrangements for managing contacts and referrals in the Multi-Agency

Safeguarding Hub (MASH) and thresholds for children in need of help and protection. They found the

services had significantly deteriorated since inspection in 2016. With these two points in mind the

Secretary of State for Housing, Communities and Local Government and the Secretary of State for

Education agreed with the request of the Lead Commissioner to appoint a Children’s Services

Commissioner to support the work to make improvements in Northamptonshire.

Children’s services across Northamptonshire continues to have high levels of demand, particularly in

those parts of the service that have the highest impacts on budgets, for example, where children are

required to be brought into the care of the local authority and the cost of these placements can be

considerable. Numbers of children in care continues to rise (1,119 at 31st March 2019 up by 27 from

1092 at 31st March 2018). However, other parts of the service are showing a decline in volume after

years of increases as changes to approaches across the partnership are having a positive impact.

16

CFN’s final outturn position was an underspend of £2.8m.The underspend is largely due to a number

of one-off in-year interventions which include:

Staffing underspend due to difficulty in recruiting and retaining qualified social care staff;

Release of over accruals from prior years;

The use of one off non-ring fenced grant income and one-off reinvestment from Public

Health in prevention programmes.

These one-off mitigations total £5.8m. Further underspends across the Directorate totalling £3.7m

offset the pressures due to non-budget delivery and demand above budgeted levels. The most

significant being a £0.8m underspend in Unaccompanied Asylum Seeking Children (UASC), which can

be attributed to the various measures implemented to maximise the central government grant income

and improved controls over the expenditure. There were also underspend in Commissioning due to

additional income above anticipated levels totalling £0.6m, income for the residential short breaks

service secured from the Clinical Commissioning Groups totalling £0.3m and general underspend on

discretionary expenditure due to improved expenditure controls.

Adjusting for the one-off mitigations above reveals an underlying pressure of £2.8m which is largely

due to non-viable savings proposals linked to the provision of care for Children in Care and Disabled

Children packages of care in the community. These have been addressed in the 2019-20 budget.

Further pressures totalling £4.0m are linked to demand above budgeted levels, as well as the increased

complexity of children in care which means that placement costs have increased."

Further underspends across the Directorate totalling £3.7m offset the pressures due to non-budget

delivery and demand above budgeted levels. The most significant of these is a £0.8m underspend in

Unaccompanied Asylum Seeking Children (UASC), which can be attributed to the various measures

implemented to maximise the central government grant income and improved controls over the

expenditure. There were also underspend in Commissioning due to additional income above

anticipated levels totalling £0.6m, income for the residential short breaks service secured from the

Clinical Commissioning Groups totalling £0.3m and general underspend on discretionary expenditure

due to improved expenditure controls.

LGSS

LGSS provides shared back office services to Northamptonshire County Council, Cambridgeshire County Councils and Milton Keynes Council, and also provides services to a number of external customers and a range of schools. Services for Northamptonshire County Council include Transactional Finance, Information Technology, Human Resources and Business Systems. LGSS final outturn position for Northamptonshire County Council was a £0.1m underspend.

17

Wellbeing & Prevention

The Public Health Directorate takes a strategic view of health management in the county with a lead

role on the Health & Wellbeing Board in the county. The aim of the Northamptonshire Health and

Wellbeing Board is to secure better health and wellbeing outcomes in the region, better quality of care

for all their patients and care users, and better value for the taxpayers. In doing so, it brings together

the NHS, local councils, the Police and other services.

Good health and wellbeing is about more than just healthcare – it covers a good start in life, education,

suitable work and housing. The Public Health Grant supports various support services across the

county, such as the supporting independence programme (to identify and support the mildly frail

population); NHS Health Check programme; fall prevention; drug and alcohol abuse services; support

to stop smoking, to support weight reduction programmes and 0-19 Public Health Nursing Service, etc.

The Public Health Outcomes Framework captures the impact these and other Public Health services

have on the county’s population.

Public Health’s final outturn position was an under spend of £1.1m. This was due largely to the following items:

- Net savings on the libraries proposals totalling £0.7m; - Employees and Pension restructuring savings £0.4m; - Registration under spend £0.2m; - Other savings £0.2m; - Additional cost of Public Health Grant and Judicial Reviews £0.4m.

Place

The Place Directorate has a wide range of commercial and direct service responsibilities. These range

from management of the Council land, assets portfolio (valued at £525m, excl. schools), highways and

waste disposal. The Council is responsible for 4,120km of road network and 4,500km of footways

across the county; over the course of the year there have been over 46,000 repairs made to the

network, with 98.6% of repairs being of a permanent nature. The quality of the roads and the volume

of repairs required is driven by a variety of reasons, with the seasonal weather impacting on the quality

of the road surface the most. The winter period was milder this year than last, but the Council still

delivered 65 gritting runs between October and March, keeping major roadways clear and safe for all

road users.

Place’s final outturn position was an underspend of £2.9m. Under-delivery of savings proposals relating

to the rental of One Angel Square, the commercialisation of assets, together with delayed

implementation of the budget proposals for Trading Standards and on-street parking initiatives, led to

a budget pressure of £1.4m. In addition, an in-year change of approach to both the implementation of

a Managing Agent delivery model and the generation of commercial income added a further £1.5m to

this pressure. There were also overspends on Property Services (£0.5m), Highways (£1.1m) and Home

to School Transport (£0.3m) contributing to an overall overspend of £5.3m.

Offsetting this pressure were a range of underspends across all areas of the Directorate totalling £8.1m.

The most significant of these was a £3.3m underspend on Waste Management driven mainly by lower

than forecast activity, but also by the in-year withdrawal of the recycling credit premium paid for food

waste, a revised approach to paint disposal and deferred activity at closed landfill sites. There was also

reduced activity in relation to Concessionary Fares (£0.4m). Additional income was received in relation

to parking penalty charges, s106 administration and the New Roads and Street Works Act, as well as

from contract penalty deductions on PFI schemes. During 2018-19 the Directorate also carried out a

https://fingertips.phe.org.uk/profile/public-health-outcomes-framework/data#page/0/gid/1000049/pat/6/par/E12000004/ati/102/are/E10000021

18

large scale restructure and this led to significant savings as posts were held vacant pending

consultation and the conclusion of the review.

Chief Executive Services

Chief Executive Services’ final outturn position was an underspend of £0.5m. Under-delivery of savings

proposals relating to digitalisation and a cross-cutting review of commercial activity led to a budget

pressure of £0.3m. In addition, there was an overspend of £0.3m on the External Audit budget due to

additional work relating to the closure of the 2017-18 accounts. There was also a combined overspend

of £0.4m on the Business Intelligence and Communication teams due to increased staffing and licence

costs and reduced income, contributing to an overall overspend of £1.1m.

Offsetting this £1.1m pressure were underspends across other areas of the Directorate totalling £1.6m.

There was an underspend in Customer Services of £0.4m as a result of reduced expenditure on both

staffing and professional fees and the generation of additional income. Democratic Services also

underspent by £0.3m due to a decrease in members’ allowances, a cost neutral approach to civic

events, vacancies and increased income. In addition to this, £0.5m of transformation funding was used

to offset the costs of staff working solely on eligible projects.

Corporate Services

Corporate Services’ final outturn position was an underspend of £18.0m. This was partly due to a

change in the Council’s Minimum Revenue Provision (MRP) policy which was approved by Council in

March 2018, which reduced the Council’s 2018-19 MRP charge by £11.6m compared to the original

budgeted amount.

Other mitigations included a release of items from earmarked reserves following a review of the

Balance Sheet. This included £1.0m from the Business Rates Retention Reserve, £1.0m from the

Redundancy Reserve and £0.5m from the Asset Utilisation Reserve. The balance sheet review also

resulted in the identification of £0.6m of historic balances that could be released from suspense and

holding accounts.

A reserve of £3.8m held in respect of sleep-in allowances was also able to be released during 2018-

19 following the outcome of a legal judgement.

Overall there were budget pressures within Corporate Services of £4.4m, predominantly due to under-

delivery of savings proposals. These were offset by £20.9m of mitigations, including those set out

above, and £1.5m of proposals delivered from the Council’s Stabilisation Plan.

19

Funding

The Council’s central funding comprises Council Tax, Business Rates, Revenue Support Grant and

New Homes Bonus funding. The final outturn position on this funding was that an additional £3.6m in

funding was received above the budgeted amount of £441m

The Council Tax income was received in line with the budgeted Council Tax precept amount set at the

start of the year which was estimated based upon tax base and collection rate information provided by

district and borough councils earlier in the year.

The Council is a member of Northamptonshire’s Business Rates Pool. Based upon the pool monitoring

returns there was an increase of £1m in the business rates income above the budgeted amount in

2018-19.

The Government pays Section 31 grant to local authorities in respect of Business Rates Relief, to

reimburse them for any loss of income due to tax changes. Interim payments of Section 31 grant had

been made based on 2017-18 forecasts, however the following a reconciliation process between the

interim payments and the amount actually due in year, a total of £1.2m in relation to Section 31 grant

was received by the Council from the Ministry for Housing, Communities and Local Government in

2018-19.

In addition, as announced in the 2019-20 Local Government Finance Settlement, the Council received

additional income of £1.4m in 2018-19 from the surplus generated within the Business Rates Levy

Account

Revenue Budget 2019-20

Full Council approved the Council’s 2019-20 Revenue Budget in February 2019, a gross General Fund Budget of £617.84m and a net budget of £417.72m. The budget contained additional investment of £48.2m for service inflation, demographic growth and service demand, with a savings requirement of £41.4m required to deliver a balanced budget. The net budget was funded by Business Rate income and Section 31 Grant of £102.8m. New Homes Bonus of £3.9m and £311m of Council Tax income. The Dedicated Schools Grant Budget which funds schools and education related expenditure was £600.17m.

Capital Strategy

Full Council also approved the Council’s Capital Strategy in February 2019, the key objectives for the Capital Strategy are as follows:

The delivery of a medium term capital programme which is affordable and sustainable, ensuring that the Council’s internal resources and application of external borrowing are utilised to fund capital expenditure where it supports the delivery of the Council’s financial sustainability and where there are statutory requirements such as health & safety;

New capital investment will only be permitted if it contributes to the achievement of the Council’s strategic aims and objectives;

The use of external funding is prioritised against the areas of greatest need within the County, in the main supporting highways maintenance and the delivery of education places within the county. In the current financial climate priority will be given to schemes that also deliver transformation and/or revenue savings;

20

Maximise the use of the Council’s assets, and where possible working with local partner organisations to maximise the efficiency of assets across the public sector and Northamptonshire.

The Capital Programme is the Council’s financial plan for investing in assets to efficiently deliver its statutory services and to improve the infrastructure of Northamptonshire, with the benefits lasting over a number of years. The total Capital Programme expenditure incurred in 2018-19 was £89.4m, with a projected total committed spend of £194m over the medium term horizon. The main areas of capital expenditure incurred within 2018-19 include:

Environment, Development and Transport - £52m, (58% of total spend), including investment in the Daventry Development Link Road (£13m) and Highways Maintenance Block (£7m).

Children’s, Families and Education - £30m, (33% of total spend), including investment in the Northampton International Academy School (£12m).

Adult Social Care - £6m, (7% of total spend), including the capitalisation of Community Equipment (£4m).

Statement of Accounts 2018-19

The Statement of Accounts for 2018-19 has been prepared in accordance with the ‘Code of Practice

on Local Authority Accounting in the United Kingdom’. This sets out the accounting principles and

practices required to present a true and fair view of the financial position of a local Council and is based

on International Financial Reporting Standards (IFRS).

The Core Financial Statements are set out on pages 30 to 86 and consist of the following, which are

explained in more detail in the notes to the accounts:

Comprehensive Income and Expenditure Statement (CIES) – this statement provides a

summary of the resources which have been applied and generated in providing services and

managing the Council during the year;

The net cost of services for 2018-19 across the Council’s directorates was £469.3m. After taking

into consideration other operating expenditure, financing and investment income/expenditure,

grant income, and income from taxation (Council Tax and Business Rates), the Council’s deficit

on the provision of services was £66.4m.

It should be noted that the CIES shows the resources that have been generated and consumed

in providing services and managing the Council in accordance with generally accepted

accounting practices, rather than the amount to be funded from taxation. The amount to be

funded from taxation can be seen within the Council’s Movement in Reserves Statement.

Balance Sheet – sets out the assets and liabilities recognised by the Council at the Balance

Sheet date with the bottom line showing an overall negative net worth £216.1m for the

organisation. The net assets of the Council (assets less liabilities) are matched by the Reserves

held by the Council.

There has been a reduction in both long term and short term borrowing undertaken by the

authority of £23.5m.This is in part a result of the improved useable reserves balance (increased

by £56m) which has given the authority the flexibility to use less borrowing to fund payments as

they fall due.This was beneficial to the revenue position as the cost of borrowing is higher than

the interest that could have been received from investments

21

The movement in the value of the Council’s Property, Plant and Equipment (PPE) on the

Balance Sheet incorporates the revaluation of assets under the rolling valuation programme,

together with any additions, disposals and reclassifications which took place during the year.

PPE reduced by £72.1m during 18/19, giving a closing balance of £1,112m.This is in part caused

by a number of schools converting to academy status in year, as a result the schools assets are

no longer held on the authorties balance sheet and therefore have contributed to a declining

asset base (by value) over a number of years.

Movement in Reserves Statement – representing the movements on the reserves held by the

Council during the financial year analysed into 'usable reserves' (i.e. those that can be applied

to fund expenditure or reduce local taxation) and ‘unusable’ reserves. The ‘surplus or (deficit)

on provision of services’ line shows the true economic cost of providing the Council’s services,

more details of which are shown in the CIES. These are different from the statutory amounts

required to be charged to the General Fund balance for Council Tax setting purposes. The ‘net’

increase/decrease before transfers to earmarked reserves’ line shows the statutory General

Fund balance before any discretionary transfers to or from earmarked reserves undertaken by

the Council.

The Movement in Reserves Statement shows the Council’s brought forward deficit on the General Fund Balance of -£35.3m as at 31 March 2018. The capital direction issued by MHCLG enabled the Council to address the brought forward deficit from 2017-18 and to create a General Fund Balance of £20.0m at 31 March 2019. In addition, the Council’s earmarked reserves, including schools reserves, have increased by

£16.6m in year to a balance of £40.9m.

Cash Flow Statement – outlines the changes in the cash and cash equivalents, for example

changes in debtor balances (those owing the Council money) and creditor balances (those

which the Council owes money to) during the year. The statement shows how the Council

generates and uses cash and cash equivalents by classifying cash flows as operating, investing

and financing activities.

The headline figures from this statement are that during 2017-18 the Council’s cash and cash

equivalents increased by £17.8m from £29.4m as at 31 March 2018 to £48.9m as at 31 March

2019.

Expenditure and Funding Analysis – This shows the difference between the net expenditure

chargeable to the Council’s General Fund and earmarked reserves and the income and

expenditure in the CIES. It also demonstrates how the Council’s resources are allocated

between directorates.

The net expenditure chargeable to the Council’s General Fund is £6.2m. This differs from the

income and expenditure shown in the CIES by £60.1m. This difference comprises a number of

technical accounting adjustments which the Council is required to make by the Code, including

capital charges such as depreciation, actuarial pensions adjustments and adjustments to the

Collection Fund. A reconciliation of these adjustments is shown in Note 1 to the accounts on

page 45.

Key Accounting Decisions

Capitalisation Direction As outlined in , the Council was provided with an option to be able to use a capitalisation dispensation of up to £70m. This was used in year and utilised the majority of the capital receipts available.

22

£‘000

Opening Capital Receipts Reserve 16,998

One Angel Street Sale and Leaseback 47,368

Other Disposals in Year 11,700

Total Capital Receipts Available 76,066

Capitalisation Dispensation 70,000

Flexible Use of Capital Receipts 2,834

Total Capital Receipts used in year 72,834

Closing Capital Receipts Reserve

3,232

As a result, the general fund balance at the 31 March 2019 was £20m (increased by £55.3m from a negative general fund balance of £35.3m as at the 31 March 2018) and earmarked reserves increased from £3.2m at the 31 March 2018 to 19.9m at the 31 March 2019. This is in accordance with the aims and rules outlined within the capitalisation direction. One Angel Square Disposal Included within the Capital Receipts Reserves is the capital receipt of £47.4m for One Angel Square. This is significantly different from the £64m consideration received for the sale aspect of the sale and leaseback agreement. The reason for this is that the Code of Practice outlines that a sale and leaseback is in substance two transactions that are linked. Therefore, in order to receive the £64m, the authority needed to enter into a lease agreement, and the correct accounting treatment is to treat the initial capital receipt at the fair value at the date of disposal (this was £47.4m) with the difference between the sale price and this valuation (£16.6m) to be apportioned proportionately each year for the duration of the lease, thereby effectively reducing the cost of the lease to the authority. Note: The above paragraph only relates to the accounting entries.The £64m was received in April 2018 and therefore the £16.6m will be available for the authority to use to invest or internally borrow over the duration of the lease agreement.

23

Statement of

Responsibilities This is the statement by the Council’s Section 151 Officer, which states the accounts are presented fairly to reflect the financial position of the Council. Also in this section is the signature of the Audit Committee Chair when the Statement of Accounts were approved.

24

Statement of Responsibilities The Council’s responsibilities

The Council is required to:

Make arrangements for the proper administration of its financial affairs and to ensure that one of its officers has the responsibility for the administration of those affairs. In this Council, that officer is the Section 151 Officer.

Manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets.

Approve the Statement of Accounts.

Following the delegation of responsibility by the Council to the Audit Committee, I confirm that the accounts will be discussed by the Audit Committee at its meeting in November 2019. Bill Jessup Chair of the Audit Committee

Responsibilities of the Council’s Section 151 Officer

The Section 151 Officer is responsible for the preparation of the Council’s Statement of Accounts and the Northamptonshire Pension Fund’s Statement of Accounts, in accordance with proper practices as set out in The Chartered Institute of Public Finance and Accountancy (CIPFA)/Local Authority Scotland Accounts Advisory Committee (LASAAC) Code of Practice on Local Authority Accounting in the United Kingdom (‘the Code of Practice’), and is required to give a true and fair view of the financial position of the Council at the accounting date and its income and expenditure for the year ending 31 March 2019.

In preparing this Statement of Accounts, the Section 151 Officer has:

Selected appropriate accounting policies and then applied them consistently,

Made judgments and estimates that were reasonable and prudent, and

Complied with the Code of Practice.

The Section 151 Officer has also:

Kept proper accounting records that were up to date, and

Taken reasonable steps for the prevention and detection of fraud and other irregularities.

Certificate of the Section 151 Officer

I certify that the Statement of Accounts give a true and fair view of the financial position of Northamptonshire County Council and the Group at 31 March 2019 and the Authority’s and the Group’s income and expenditure for the year then ended.

I certify that the Statement of Accounts give a true and fair view of the financial transactions of the Northamptonshire Pension Fund during the year ended 31 March 2019 and the amount and disposition of the Fund’s assets and liabilities as at 31 March 2019. Ian Duncan Section 151 Officer. 13 September 2019

25

Independent auditor’s report to the members of Northamptonshire County Council

Left blank to insert auditor’s report.

26


27


28


29

General Information Summary of Accounting Concepts and Policies

Basis of preparation

The Council is required to prepare an annual Statement of Accounts by the Accounts and Audit (England) Regulations 2015. These regulations require the Statement of Accounts to be prepared in accordance with proper accounting practices. These practices primarily comprise the Code of Practice on Local Authority Accounting in the United Kingdom 2018-19 (the Code) supported by International Financial Reporting Standards (IFRS).

Accounting developments and changes during 2018-19

Going Concern Assumption

On 2 February 2018 the Council’s s151 Officer (Chief Finance Officer) issued a notice under s114 of the Local Government Finance Act 1988. This was to prompt action to attempt to avoid a negative General Fund balance even at such a late stage in the financial year. A second s114 notice was issued on 24 July 2018 when it was identified it was likely that the Council faces a need to find in the region of £60 million to £70 million of in-year savings in 2018/19, including the 2017/18 unfunded deficit.

On 27 March 2018 the Secretary of State invited proposals for local government restructuring within Northamptonshire. Following a period of consultation, the Secretary of State announced in May 2019, that Northamptonshire County Council, along with the Districts and Boroughs of Northamptonshire, will be restructured to form two unitaries authorites operating from the 1st April 2021.

Given these circumstances it may be considered that there is a material uncertainty that may cast doubt

upon the Council’s ability to continue as a going concern. However for the reasons set out below the Council

believe it remains appropriate to prepare the Statement of Accounts on a going concern basis. The

Statement of Accounts do not include any adjustments that would result from the basis of preparation being

inappropriate.

The Council operates within a highly legislated and controlled environment. The CIPFA 2018/19 Code

articulates the going concern assumption for local authorities.

Liquidity: available cash resources or access to borrowing to pay commitments

At 31 March 2019 the Council had net current liabilities of £217m, which includes £239.4m of short term

borrowing. The Council’s current treasury management strategy is to borrow short term to finance its capital

investment programme to take advantage of lower interest rates. The Council will re-finance this debt as it

matures, if necessary from the Public Works Loans Board.

At the end of the financial year the Council was well below its underlying capital borrowing requirement by

£94m and could therefore borrow this amount if required. In addition the Council’s main office building, One

Angel Square, was sold for £64m in April 2018.

The Council therefore has available cash resources or access to borrowing to pay commitments.

Financial Sustainability in the short to medium term

The Council with the support of the Commissioners appointed by the Secretary of State approved a Stabilisation Plan on 9th October 2018 that will help address the in-year budget deficit. In addition the Council was advised on 28 November that it was successful in its application for a direction to treat revenue expenditure as capital expenditure, thereby enabling the Council to use capital receipts towards revenue expenditure. The Direction is worth up to £70m and has three components:

30

The recovery of the deficit on revenue reserves at 31 March 2018;

The creation of an unallocated revenue reserve of £20m;

The balance to be used to manage the risk that the financial savings in the Stabilisation Plan are not

realised in full in 2018/19.

On 11 December 2018 the Council issued its draft budget for 2019/20 and medium term plan to 2021/22. The budget will be approved in February 2019 following a period of consultation.

The impact of the proposed abolition of Northamptonshire County Council and the creation of two

new unitary councils from April 2020.

Paragraph 2.1.2.6 of the CIPFA Code states that “transfers of services under combinations of public sector

bodies (such as local government reorganisation) do not negate the presumption of that the financial

statements shall be prepared on a going concern basis of accounting.”

Paragraph A25 of the CIPFA Guidance Notes for Practitioners reiterates that: - “The concept of a going concern assumes that an authority’s functions and services will continue in operational existence for the foreseeable future. The provisions in the Code in respect of going concern reporting requirements reflect the economic and statutory environment in which local authorities operate. These provisions confirm that, as authorities cannot be created or dissolved without statutory prescription, they must prepare their financial statements on a going concern basis of accounting.”

Therefore if a statutory order is taken by the Secretary of State to abolish Northamptonshire County Council and create two new unitary councils from April 2020 the functions of the authority will continue in operational existence for the foreseeable future.

Summary of Critical Accounting Policies

The accounts are prepared on an accruals basis. Income and expenditure is recognised in the accounts in the period in which it is earned or incurred,and therefore not when cash is received or paid.

Going Concern. The accounts have been prepared for the 2018/19 financial year on a going concern basis under the Code, which will be reviewed as the model of local government in the county is confirmed in subsequent years.

Reserves. The Council sets aside specific amounts as reserves for future policy purposes or to protect against unexpected events. When expenditure to be financed from a reserve is incurred, it is charged to the appropriate service revenue account in that year, to be recorded against the Net Cost of Services in the Comprehensive Income and Expenditure Account. The reserve is then appropriated back into the General Fund Balance in the Movement in Reserves Statement so that there is no net charge against Council tax for the expenditure.

Government Grants and Contributions. Whether paid on account, in arrears or by instalments, Government grants and other contributions are accounted for on an accruals basis and recognised as income when there is reasonable assurance that the Council will comply with the conditions attached to the payments, and the grants or contributions will be received.

The Local Government Pension Scheme. The Local Government Pension Scheme is accounted for as a defined benefits scheme. The liabilities of the Pension Fund attributable to the Council are included in the Balance Sheet on an actuarial basis using the projected unit method i.e. an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates, employee turnover rates, and projections of projected earnings for current employees.

Property, Plant and Equipment Assets that have physical substance and are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes and that are expected to be used during more than one

31

financial year are classified as Property, Plant and Equipment. Assets are initially measured at cost, comprising the purchase price, any costs attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. The Council has adopted a policy of capitalising borrowing costs incurred whilst assets are under construction.

Financial Liabilities Financial liabilities are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value and are carried at their amortised cost. Annual charges to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest payable are based on the carrying amount of the liability, multiplied by the effective rate of interest for the instrument.

Interests in Companies and Other Entities The Council is required to produce Group Accounts alongside its own financial statements where it has material interests in subsidiaries, associates and/or joint ventures. The Council has involvement with a number of companies, and has concluded that the requirement to produce Group Accounts applies in relation to its interest in Northamptonshire Trading Limited, Olympus Care Services Limited and First for Wellbeing CIC. In the Council’s single‐entity accounts, the interests in companies and other entities are

recorded as financial assets at cost.

For a full set of the Council’s Accounting Policies refer to Appendix 1.

Accounting standards that have been issued but have not yet been adopted The Code requires the disclosure of information relating to the expected impact of an accounting change that will be required by a new standard that has been issued but not yet adopted. This applies to the adoption of the new or amended standards within the 2018-19 Code.

The standards that may be relevant for additional disclosures that will be required in the 2018/19 and 2019/20 financial statements in respect of accounting changes that are introduced in the 2019/20 Code (ie that are relevant to the requirements of paragraph 3.3.4.3) are:

Amendments to IAS 40 Investment Property: Transfers of Investment Property

Annual Improvements to IFRS Standards 2014 - 2016 Cycle

IFRIC 22 Foreign Currency Transactions and Advance Consideration

IFRIC 23 Uncertainty over Income Tax Treatments

Amendments to IFRS 9 Financial Instruments: Prepayment Features with Negative Compensation

Critical judgements in applying accounting policies

In applying the accounting policies set out in Appendix 1 the Council has had to make certain judgements about complex transactions or those involving uncertainty about future events. The critical judgements made in the Statement of Accounts are:

Future levels of funding for local government

There is a high degree of uncertainty about future levels of funding for local government and the basis of funding with the planned retention of business rates. However, the Council has judged that this uncertainty is

32

not yet sufficient to provide an indication that the assets of the Council might be impaired as a result of a need to close facilities and reduce levels of service provision.

PFI and Similar Arrangements

The Council is deemed to control the services provided in its PFI arrangements and also to control the residual value of the assets at the end of the contract. The accounting policy for PFIs and similar contracts has been applied to these arrangements and the assets are recognised as Property, Plant and Equipment in the Council’s Balance Sheet.

In applying this PFI accounting policy, the Council has made the following judgements:

The operators’ models were examined to identify the service element of the unitary charge. Where that charge couldn’t be clearly separated the relevant costs were obtained from the models and a margin was applied to the costs to provide an amount for the service costs. The margin used was based on advice received from expert external advisors.

The service element of the unitary charge is inflated annually by an agreed indicator (e.g. Retail Price Index) as per the contract.

The implicit interest rate was calculated by discounting the non-service element of the unitary charge at a rate that brings it back to the fair value of the asset.

The fair value of the asset is taken as the construction or refurbishment costs of the scheme.

Accounting for leases

Judgements have been made regarding whether risks and rewards of ownership pass to the lessee under lease arrangements. Where risks and rewards are transferred, leases have been classified as finance leases.

Arrangements Containing a Lease

The Council may enter into an arrangement, comprising a transaction or a series of related transactions, that does not take the legal form of a lease but conveys a right to use an asset (e.g. an item of property, plant or equipment) in return for a payment or series of payments. IFRIC 4 provides guidance for determining whether such arrangements are, or contain, leases that should be accounted for in accordance with IAS 17.

Judgements have been made regarding whether:

Fulfilment of the arrangement is dependent on the use of a specific asset or assets (the asset); and the arrangement conveys a right to use the asset.

An arrangement conveys the right to use the asset if the arrangement conveys to the purchaser (lessee) the right to control the use of the underlying asset. The right to control the use of the underlying asset is conveyed if any one of the following conditions is met:

The purchaser has the ability or right to operate the asset or direct others to operate the asset in a manner it determines while obtaining or controlling more than an insignificant amount of the output or other utility of the asset.

The purchaser has the ability or right to control physical access to the underlying asset while obtaining or controlling more than an insignificant amount of the output or other utility of the asset.

Facts and circumstances indicate that it is unlikely that one or more parties other than the purchaser will take more than an insignificant amount of the output or other utility that will be produced or generated by the asset during the term of the arrangement, and the price that the purchaser will pay for the output is neither contractually fixed per unit of output nor equal to the current market price per unit of output as of the time of delivery of the output.

The Council is deemed to control assets that fall within contractual and other arrangements which involve the provision of a service using specific underlying assets and which therefore are considered to contain a lease. Arrangements containing a finance lease have been added to the Balance Sheet as assets under Property, Plant and Equipment.

33

Legal Claims against the Council

In deciding whether to recognise material legal claims against the Council as an item of expenditure in the accounts, the Council has taken a judgement on:

The likelihood of an outflow of resources and,

The degree of certainty surrounding the amount of any outflow.

Where an outflow of resources is unlikely or the amount cannot be measured with sufficient reliability, the Council has judged the material legal claim to be a Contingent Liability and disclosed it as a note. Where an outflow of resources is probable and a reliable estimate can be made of the amount of the obligation, the Council has judged the legal claim against the Council to be a provision and recognised this in the accounts.

Accounting for Schools – Consolidation

In line with the Code requirements on group accounts and consolidation, maintained schools within the County are considered to be entities controlled by the Council. The income, expenditure, assets, liabilities, reserves and cash flows of these schools are recognised within the Council’s single entity accounts rather than the group accounts.

Accounting for Schools – Balance Sheet Recognition

The Council recognises the land and buildings used by schools in line with the requirements of the Code. It states that property used by local authority maintained schools should be recognised in accordance with the asset recognition tests relevant to the arrangements that prevail for the property. The Council recognises the schools land and buildings on its Balance Sheet where it directly owns the assets and/or the Council retains substantive rights over the assets and the future economic benefits/service potential of school assets flow to the Council or rights to use the assets have been transferred from another entity.

Accounting for Schools – Academies

Academies are not considered to be maintained schools in the Council’s control, so their assets are not included within the Council’s Balance Sheet. When a school held on the Council’s Balance Sheet transfers to Academy status this is treated as an asset disposal for nil consideration. The underlying ownership does however remain with the Council.

Better Care Fund

The Council recognises expenditure and income relating to its duties with regard to the Better Care Fund (BCF) created in partnership with local health Clinical Commisioning Groups (CCGs) which became operational on the 1st April 2015. The fund’s governance arrangements are outlined in the Section 75 Agreement between the Council and the local CCGs, and involve the strategic oversight by the Health and Wellbeing Board. After reviewing the substance of the agreement between the parties, against the accounting standards, it is appropriate for each entity governed by the section 75 agreement to account for expenditure they commission, with the other parties expenditure disclosed in a note to the accounts (Note 8).

Sale of One Angel Square

We have been in discussion with our appointed valuers, Wilks Head and Eve, and the valuation approach for One Angel Square was reviewed as part of the 2018/19 asset valuation process. The Section 151 Officer has concluded that a more appropriate valuation method is to move from an Existing Use basis to Depreciated Replacement Cost, to reflect the specialist nature of the building and the circumstances that led to its construction. These have been summarised below:

• The property is of a size and specification where there is no significant and active market within Northampton;

• The property was constructed as part of a wider property rationalisation programme which saw the County Council close 12 buildings and move them into a single HQ location (One Angel Square);

• The construction cost of the property is in excess of one which would be considered financially viable for an alternative owner occupier or investor. Essentially no other firm is likely to have built the property if NCC did not;

• NCC as a public sector authority had a vested interest in ensuring that its Headquarters property was built in the town centre. This contradicts the wider market where focus has shifted over the last 10 years to out of town locations where connectivity is improved and returns are higher.

34

• The Business Case for One Angel Square included social and economic (non-tangible) factors including:

Regeneration within Northampton town centre;

Improved consumer spending due to increased footfall within the town centre;

The property was built to meet the specific needs of Northamptonshire County Council and one where the financial return (on investment) was not the principal driver.

Assumptions made about the future and other major sources of estimation uncertainty

The Statement of Accounts contains estimated figures that are based on assumptions made by the Council about the future or that are otherwise uncertain. Estimates are made taking into account historical experience, current trends and other relevant factors. However, because balances cannot be determined with certainty, actual results could be materially different from the assumptions and estimates.

The items in the Council Balance Sheet at 31 March 2019 for which there is a significant risk of material adjustment in the forthcoming financial year are as follows:

Item Uncertainties Effect if Actual Results Differ from Assumptions

Property, Plant and Equipment

Assets are depreciated over useful lives that are dependent on assumptions about the level of repairs and maintenance that will be incurred in relation to individual assets. The current economic climate makes it uncertain that the Council will be able to sustain its current spending on repairs and maintenance, bringing into doubt the useful lives assigned to assets.

If the useful life of assets is reduced, depreciation increases and the carrying amount of the assets falls.

It is estimated that the annual depreciation charge for buildings would increase by £2,889k for every year that useful lives had to be reduced.

Pensions Liability

Estimation of the net liability to pay pensions depends on a number of complex judgements relating to the discount rate used, the rate at which salaries are projected to increase, changes in retirement ages, mortality rates and expected returns on pension Fund assets. A firm of consulting actuaries is engaged to provide the Council with expert advice about the assumptions to be applied.

The effects on the net pensions liability of changes in individual assumptions can be measured.

For instance, a 0.5% decrease in the discount rate assumption would result in an increase in the pension liability of approximately £175.8m.

A 0.5% increase in salary increase rate would result in an increase of approximately £m in the pension fund liability.

A 0.5% increase in pension increase rate would result in an increase of approximately £333m in the pension fund liability.

Insurance Provision and Reserve

The Council has made a provision of £6.2m for actual insurance claims outstanding and a reserve of £3.5m is set aside for future unknown insurance claims. The reserve amount held is validated annually via actuarial examination by independent advisors, who have specialist experience in forecasting.

Some insurance claims, particularly those relating to injuries, may take a number of years to settle. Throughout the life of a claim the handler will make regular assessments as to the expected final cost of the claim, this is known as reserving. At any one time the claim reserve will be based on a number of assumptions made by the claim handler with the reserve being adjusted as and when new information becomes available.

The level of provision is reassessed annually based upon the latest information provided by the insurance actuary. If claims are rejected or settled for less, the excess would be released. If claims are settled at a higher amount than provided for, then the shortfall would be funded by the insurance reserve. If the reserve was depleted this would impact on revenue.

35

This list does not include assets and liabilities that are carried at fair value based on a recently observed market price.

Prior Period Adjustments No prior period adjustments have been included within this set of accounts

Events after the Balance Sheet date The Statement of Accounts were authorised for issue by the Section 151 Officer on 31 July 2019. Events taking place after this date are not reflected in the financial statements or notes. Where events taking place before this date provided information about conditions existing at 31 March 2019, the figures in the financial statements and notes have been adjusted in all material respects to reflect the impact of this information.

To date, no events after the balance sheet date have been identified. This will be monitored, and any post balance sheet events that are identified before the accounts are audited will be included with the final accounts.

36

The Core Statements Comprehensive Income and Expenditure Statement

Balance Sheet

Movement in Reserves Statement

Expenditure and Funding Analysis

Cash Flow Statement

These financial statements and accompanying notes have been prepared using the relevant level of rounding according to individual notes. In some instances, this has led to a small variance in totals/sub-totals. Any minor variances of 1-3 units (£’000 etc) are caused by rounding and are considered to be trivial for the purpose of the accounts.

The unaudited accounts were issued on 13 September 2019

37

Comprehensive Income and Expenditure Statement This statement shows the resources that have been generated and consumed in providing services and managing the Council in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. It includes all day to day expenses and related income on an accrual basis as well as transactions measuring the value of non-current assets actually consumed and the real projected value of retirement benefits earned by employees in the year.

2017-18 2017-18 2017-18 2018-19 2018-19 2018-19

£000 £000 £000 £000 £000 £000

7,377 (378) 6,999 Chief Executive Services 9,259 (968) 8,291

476,803 (310,201) 166,602 Children First Northamptonshire 457,127 (313,017) 144,110

49,219 (18,227) 30,992 LGSS 55,053 (28,192) 26,861

233,252 (63,890) 169,362Northamptonshire Adult Social

Services (NASS)246,738 (78,554) 168,184

173,271 (47,466) 125,805 Place Services 172,696 (60,068) 112,628

59,687 (47,207) 12,480 Wellbeing and Prevention 46,931 (42,549) 4,382

(5,438) (1,741) (7,179) Corporate Costs 19,723 (14,885) 4,838

994,171 (489,110) 505,061 Cost of Services 1,007,527 (538,233) 469,294

42,133 (9,226) 32,907Other Operating Income and

Expenditure46,513 0 46,513

66,651 (13,193) 53,458Financing and Investment

Income\Expenditure31,550 (1,006) 30,544

6 (462,013) (462,007)Taxation and Non Specific Grant

Income24 (480,025) (480,001)

1,102,961 (973,542) 129,419(Surplus) or Deficit on Provision

of Services1,085,614 (1,019,264) 66,350

(64,301)(Surplus) or Deficit on Revaluation

of Non Current Assets(21,581)

(25,384)Actuarial (gains) / losses on

pension assets / liabilities85,026

0 Transfer of Pensions Liability (276,140)

(89,685)Other Comprehensive (Income)

and Expenditure(212,695)

39,734Total Comprehensive (Income)

and Expenditure(146,345)

Gro

ss

Exp

en

dit

ure

Gro

ss

Inco

me

Net

Exp

en

dit

ure

Gro

ss

Exp

en

dit

ure

Gro

ss

Inco

me

Net

Exp

en

dit

ure

38

Balance Sheet The Balance Sheet shows the value as at the Balance Sheet date of the assets and liabilities recognised by the Council. The net assets of the Council (assets less liabilities) are matched by the reserves held by the Council. The Balance Sheet is fundamental to the understanding of the Council’s financial position at the end of the financial year. This statement reports on the Council’s balances on assets (non-current and current), liabilities (long and short term) and reserves.

31 March 2018 31 March 2019

£000 Notes £000

1,184,478 Property, Plant and Equipment 12 1,112,445

2,054 Heritage Assets 12 2,055

17,373 Investment Property 12 14,085

4,867 Intangible Assets 12 4,926

1 Long Term Investments 1

29,939 Long Term Debtors 18 28,645

1,238,712 Long Term Assets 1,162,157

7,150 Short Term Investments 200

3,921 Assets held for Sale 12 1,656

556 Inventories 677

94,077 Short Term Debtors 18 99,249

33,232 Cash and Cash Equivalents 20 48,951

138,936 Current Assets 150,733

(3,839) Bank Overdraft 20 0

(255,560) Short Term Borrowing 17 (239,354)

(121,710) Short Term Creditors 19 (102,509)

(1,490) Receipts in Advance 10 (229)

(26,962) Capital Grants Receipts in Advance (<1yr) 20 (16,468)

(9,431) Provisions (<1yr) 21 (9,563)

(418,992) Current Liabilities (368,123)

(35,263) Capital Grants Receipts in Advance (>1yr) 10 (38,170)

(8,920) Provisions (>1yr) 21 (8,580)

(348,547) Long Term Borrowing 17 (341,238)

(928,405) Other Long Term Liabilities 23 (772,913)

(1,321,135) Long Term Liabilities (1,160,901)

(362,479) Net Liabilities (216,134)

31,091 Usable Reserves 26 87,041

(393,570) Unusable Reserves 26 (303,175)

(362,479) Total Reserves (216,134)

39

Movement in Reserves Statement This statement shows the movement in the year on the different reserves held by the Council analysed into ‘Usable reserves’ (i.e. those that can be applied to fund expenditure or reduce local taxation) and Unusable reserves. The Surplus or Deficit on the Provision of Services line shows the true economic cost of providing the Council’s services, more details of which are shown in the Comprehensive Income and Expenditure Statement. These are different from the statutory amounts required to be charged to the General Fund Balance for Council Tax setting purposes. The Net Increase/Decrease before Transfers to Earmarked Reserves line shows the statutory General Fund Balance before any discretionary transfers to or from earmarked reserves undertaken by the Council.

40

Expenditure and Funding Analysis

The Expenditure and Funding Analysis shows how annual expenditure is used and funded from resources by local authorities in comparison with how those resources are consumed or earned by authorities in accordance with generally accepted accounting practices. It also shows how the expenditure is allocated for decision making purposes between the Council’s directorates. Income and expenditure accounted for under generally accepted accounting practices is presented more fully in the Comprehensive Income and Expenditure Statement on page 32.

Net

expenditure

chargeable to

the General

Fund and

Earmarked

Reserves

Adjustments

between

Funding and

Accounting

Basis

2017-18 Net

Expenditure

in the CIES

Net expenditure

chargeable to

the General Fund

and Earmarked

Reserves

Adjustments

between

Funding and

Accounting

Basis

2018-19 Net

Expenditure

in the CIES

£000 £000 £000 £000 £000 £000

22,740 (15,741) 6,999 Chief Executive Services 7,503 788 8,291

121,155 45,446 166,602 Children First Northamptonshire 136,093 8,017 144,110

22,621 8,371 30,992 LGSS 14,387 12,474 26,861

168,302 1,060 169,362Northamptonshire Adult Social

Services (NASS)161,917 6,267 168,184

96,729 29,076 125,805 Place 98,107 14,521 112,628

18,073 (5,593) 12,480 Wellbeing and Prevention 1,550 2,832 4,382

(3,587) (3,592) (7,179) Corporate Costs (7,505) 12,343 4,838

446,033 59,028 505,061 Net Cost of Services 412,052 57,242 469,294

(390,530) 14,888 (375,642) Other Income and Expenditure (418,297) 15,353 (402,944)

55,503 73,916 129,419 (Surplus) or Deficit (6,244) 72,594 66,350

(44,533)Opening General Fund Balance at 31

March10,970

55,503Plus: Surplus on General Fund

Balance In Year(6,244)

0Plus: Movement to General Fund from

Capital Receipts Reserve(65,644)

10,970Closing General Fund Balance at 31

March(60,918)

41

Cash Flow Statement

The Cash Flow Statement shows the changes in cash and cash equivalents of the Council during the reporting period. The statement shows how the Council generates and uses cash and cash equivalents. The cash flow is analysed between operating, investing and financing activities.

The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the Council are funded by way of taxation and grant income or from the recipients of services provided by the Council.

Investing activities is the acquisition and disposal of Long Term assets and other investments that are not considered to be cash equivalents. These are intended to aid the Council to manage its service delivery over the long term.

Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (i.e. borrowing) to the Council. Cash figures are shown net of overdraft

42

Cash Flow Statement

2017/18 2018/19

£000 £000

(129,419) Net Deficit on the provision of services (66,350)

20,455 Depreciation and Impairment Losses 47,612

0 Impairment and revaluations (20,416)

0 NBV Retired Loss 41,938

0 Reclassification (3,688)

3,107 Amortisation 2,939

43 Increase(-)/Decrease in Inventory (121)

3,066 Increase/Decrease in Creditors(-) (26,788)

(11,024) Increase (-)/Decrease in Debtors (3,878)

6,928

Movement in Pension Liability (difference between employer's contributions paid

and IAS19 adjustments) 36,140

107,861

Carrying amount of non-current assets and non-current assets held for sale, sold

or derecognised 6,382

8,192 Increase/(decrease) in provisions (208)

(7,295) Other non-cash items charged to the deficit on the provision of services 3,251

131,333Adjustments to the net deficit on the provision of services for non-cash

movements 83,163

(106,395)Adjust for items included in the net surplus or (deficit) on the provision of services

that are investing and financing activities 0

(104,481) Net Cashflows from Operating Activities 16,813

(81,500) Purchase of Property, Plant and Equipment (59,842)

(108,612) Purchase of short-term and long-term investments (1,526)

9,226 Proceeds from the Sale of Property, Plant and Equipment 82,788

0 Grants for financing capital expenditure 230

0 Grants for financing Capital Exp (1,490)

121,129 Proceeds from short-term and long-term investments 6,619

113,457 Other receipts from investing activities 0

53,700 Investing Activities 26,779

(7,573)Cash payments for the reduction of the outstanding liabilities relating to finance

leases and on-balance sheet PFI contracts (Principal)(179,581)

74,165 Receipt of short and long-term loans 155,548

66,592 Financing Activities (24,033)

15,811 Net Increase /Decrease in cash and cash equivalents 19,559

13,582 Cash and Cash equivalents at the beginning of the reporting year 29,393

29,393 Cash and Cash equivalents at the end of the reporting year 48,952

43

Notes to

the Core

Statements

44

Notes to the Statement of Accounts

1 Note to the Comprehensive Income and Expenditure Statement ................................... 45

2 Material items of income and expense ........................................................................... 47

3 Expenditure and Income analysed by nature…………………………… ……………... 47

4 Other operating expenditure .......................................................................................... 47

5 Financing and investment income and expenditure ....................................................... 48

6 Taxation and non specific grant income ......................................................................... 48

7 Trading operations ......................................................................................................... 48

8 Pooled budgets .............................................................................................................. 48

9 Dedicated schools grant ................................................................................................ 51

10 Grant income ................................................................................................................. 52

11 Investment properties .................................................................................................... 53

12 Capital Assets ................................................................................................................ 49

13 Property valuation .......................................................................................................... 53

14 Intangible Assets ........................................................................................................... 59

15 Capitalisation of borrowing costs ................................................................................... 59

16 Commitments under capital contracts ............................................................................ 60

17 Financial instruments ..................................................................................................... 61

18 Debtors and Payments in Advance ................................................................................ 64

19 Short Creditors and Receipts in Advance ....................................................................... 65

20 Cash and Cash Equivalents ........................................................................................... 65

21 Provisions ...................................................................................................................... 66

22 Contingent Liabilities ...................................................................................................... 67

23 Other Long Term Liabilities ............................................................................................ 68

24 Private Finance Initiatives and similar contracts ............................................................. 68

25 Leases ........................................................................................................................... 70

26 Reserves ....................................................................................................................... 72

27 Adjustments between accounting basis and funding basis under regulations ................ 77

28 Transfers to/from earmarked reserves ........................................................................... 79

29 Capital expenditure and capital financing ....................................................................... 80

30 Insurance Account ......................................................................................................... 81

31 External audit costs ....................................................................................................... 82

32 Members’ Allowances .................................................................................................... 82

33 Officers’ remuneration ................................................................................................... 82

34 Termination Benefits ...................................................................................................... 84

35 Transactions with related parties ................................................................................... 84

36 Pension schemes accounted for as defined contribution schemes ................................ 87

37 Retirement Benefits – IAS19 Disclosures for defined benefit pension schemes ............. 82

45

1 Note to the Comprehensive Income and Expenditure Statement

Adjustments between funding and accounting basis 2018-19

Adjustments from the General Fund to arrive at the

Comprehensive Income and Expenditure Statement

Amounts

Adjustments for

Capital Purposes

Net Change for

the Pensions

Adjustments

Other

Adjustments

Total

Adjustments

£000 £000 £000 £000

Chief Executive Services 0 788 0 788

Children First Northamptonshire 36,638 5,679 (34,301) 8,017

LGSS 9,526 2,949 0 12,474

Northamptonshire Adult Social Services (NASS) 2,558 3,709 (0) 6,267

Place 13,391 1,167 (37) 14,521

Wellbeing and Prevention 2,192 640 0 2,832

Corporate Costs 4,431 5 7,907 12,343

Net Cost of Services 68,736 14,937 (26,431) 57,242

Other Income and Expenditure 45,082 0 (29,729) 15,353

Difference between General Fund (surplus)/deficit and

CIES surplus/deficit on provision of services

113,818 14,937 (56,160) 72,594

Adjustments between funding and accounting basis 2017-18

Adjustments from the General Fund to arrive at the


Amounts

Adjustments for

Capital Purposes

Net Change for

the Pensions

Adjustments

Other

Adjustments Total

Adjustments

£000 £000 £000 £000

NCC Group (16,343) 547 55 (15,741)

Corporate and Other Services 2,153 (5,667) (78) (3,592)

LGSS Managed 5,048 0 0 5,048

Place 29,784 (939) 231 29,076

NASS (416) 1,416 60 1,060

Children, Families & Education 31,737 14,142 (432) 45,447

Public Health & Wellbeing (5,867) 283 (9) (5,593)

LGSS 0 3,038 285 3,323

Net Cost of Services 46,096 12,820 112 59,028

Other Income and Expenditure (6,535) 19,492 1,931 14,888

Difference between General Fund (surplus)/deficit and

CIES surplus/deficit on provision of services

39,561 32,312 2,043 73,916

46

Adjustments for Capital purposes

In the service lines this column records adjustments in respect of depreciation, impairment, movements in fair value of investment properties, Revenue Expenditure Funded by Capital Under Statute (REFCUS) and revaluation gains/losses

For Other Operating expenditure – adjusts for capital disposals with a transfer of income on disposal of assets and the amounts written off for those assets.

For Financing and investment income and expenditure – the statutory charges for capital financing ie Minimum Revenue Provision and other revenue contributions are deducted from other income and expenditure as these are not chargeable under generally accepted accounting practices.

For Taxation and non-specific grant income and expenditure – capital grants are adjusted for income not chargeable under generally accepted accounting practices. Revenue grants are adjusted from those receivable in the year to those receivable without conditions or for which conditions were satisfied throughout the year. The Taxation and Non-specific Grant Income and Expenditure line is credited with capital grants receivable in the year without conditions or for which conditions were satisfied in the year.

Net Change for Pensions Adjustments

Net change for the removal of pension contributions and the addition of IAS19 Employee Benefits pension related expenditure and income

For services this represents the removal of the employer pension contributions made by the authority as allowed by statute and the replacement with current service costs and past service costs.

For financing and investment income and expenditure, the net interest on the defined benefit liability is charged to the CIES.

Other Adjustments

Other difference between amounts debited/credited to the CIES and amounts payable/receivable to be recognised under statute.

For services this comprises the accrual made in respect of accumulated absences.

The charge under Taxation and non-specific grant income and expenditure represents the difference between what is chargeable under statutory regulations for Council Tax and National Non-Domestic Rates (NNDR) that was projected to be received at the start of the year and the income recognised under generally accepted accounting practices in the Code. This is a timing difference as any difference will be brought forward in future surpluses or deficits on the Collection Fund.

47

2 Material Items of Income and Expense

Education and Children’s Services includes a material item income of £231.9m in 2018-19 which is the Dedicated Schools Grant (2017-18: £233.3m). For further details on the DSG please refer to Note 9.

Taxation and Non-Specific Grant Income is £480.0m in 2018-19 (2017-18: £462.0m). This includes Revenue Support Grant of £22.3m (2017-18: £35.5m).

3 Expenditure and Income Analysed By Nature

4 Other Operating Expenditure

2017-18 2018-19

£000 £000

653 Levies 663

32,254

(Gains)/losses on the disposal of non -

current assetsª 45,850

32,907 Total 46,513

a This represents the net book value (carrying value less accumulated depreciation) of assets that have been sold or derecognised during the year, less any proceeds from the sales

2017-18 2018-19

£000 £000

Expenditure

277,036 Employee benefits expenses 313,623

690,541 Other services expenses 600,963

(7,452) Support service recharges 12,250

62,770 Depreciation,amortisation, impairment 80,715

47,159 Interest payments 31,550

653 Levies 663

32,254 (Gain)/Loss on the disposal of assets 45,850

1,102,961 Total Expenditure 1,085,614

Income

(121,270) Fees, charges and other service income (120,355)

(13,193) Interest and investment income (1,006)

(368,557) Income from council tax and NNDR (398,744)

(470,522) Government grants and contributions (499,160)

(973,542) Total Income (1,019,264)

129,419 (Surplus) or Deficit on the Provision

of Services

66,350

Expenditure/Income

48

5 Financing and Investment Income and Expenditure

2017-18 2018-19

6 Taxation and Non Specific Grant Income

7 Trading Operations The Council has trading units where the service is required to operate in a commercial environment and balance their budget by generating income from other parts of the Council or other organisations.

The net surplus has been included in the net cost of services in the Comprehensive Income and Expenditure Statement.

8 Pooled Budgets

Section 75 of the National Health Service Act 2006, enables joint working arrangements between NHS bodies and local authorities. Pooled funds enable health bodies and local authorities to work collaboratively to address specific local health issues.

Better Care Fund (BCF)

Effective from 1 April 2015, Northamptonshire County Council hosted the Better Care Fund, a national initiative to pool health and social care funding to provide integrated health and social care services to achieve better health outcomes for the local community.

The Better Care Fund is split into four main programmes, each with individual governance arrangements. The final pooled budget outturn for these programmes is outlined below.

2017-18 2018-19

£000 £000

(278,402) Council Tax income (302,217)

(90,155) Business Rate income (96,527)

(49,011) Non-ringfenced government grants (31,902)

(44,439) Capital grants and contributions (49,355)

(462,007) Total (480,001)

2017-18 2018-19

£000 £000

12,766 Turnover 7,069

(11,454) Expenditure (5,893)

1,312

Net Surplus/(Deficit) on trading

operations 1,176

2017-18 2018-19

£000 £000

47,159 Interest Payable and Similar Charges 18,273

19,492 Debt Management Expenses 13,278

(13,193) Interest Receivable and Similar Income (1,006)

53,458 Total 30,544

49

Better Care Fund – Funding and Expenditure Breakdown

2017-18 2018-19

£000 £000

Community Case Management

12,041 Funding Provided by the Council 21,969

2,258 Funding Provided by Other Partners 1,704

14,300 Total Funding 23,672

(14,144) Expenditure (23,672)

155 Net Funding / (Expenditure) 0

Crisis Intervention & Admission Avoidance


0 Funding Provided by Other Partners 698


(2,689) Expenditure (4,748)


Discharge & Intermediate Care




(27,006) Expenditure (24,964)


Integrate Care Close to Home (ICCtH)/BCF Enablers

5,378 Funding Provided by the Council 849


5,378 Total Funding 849

(5,378) Expenditure (849)


Learning Disability




(83,619) Expenditure (6,355)

(13,321) Net Funding / (Expenditure) 0


In addition to the Better Care Fund, the Council contributed to four additional pooled budgets:

Community Equipment Services within Northamptonshire – hosted by the Council, the equipment is allocated via an occupational therapy assessment to enable independent living.

Adult Mental Health Services Commissioning – hosted by the Nene and Corby Clinical Commissioning Groups (CCGs), is used to provide high quality services to promote mental health, prevent mental distress and illness and to provide timely and holistic treatment of mental illness within the County.

Child Adolescent Mental Health Services Commissioning Pool – hosted by the Nene and Corby CCGs, is used to provide high quality services to prevent mental distress and illness and to provide timely and holistic treatment of mental illness for children within the County.

50

Residential Short Breaks– hosted by the Council, the pool facilitates short breaks that aim to benefit children and young people with disabilities, complex health needs, and/or sensory impairments. Children and young people are offered experiences that foster and improve their individual and social development.This ceased in 2018-19.

2017-18 2018-19

£000 £000

Community Equipment Services within Northamptonshire






Adult Mental Health Services Commissioning




(66,016) Expenditure (71,440)

(1,775) Net Funding / (Expenditure) (653)

Residential Short Breaks



1,585 Total Funding 0

(2,636) Expenditure 0


Child Adolescent Mental Health Services Commissioning Pool (CAMHS)

610 Funding Provided by the Council 685





(2,735) Net Funding / (Expenditure) (632)

Notes

Each partner’s funding and expenditure position is audited as part of each partner's annual audit.

The overspend on the Adult Mental Health pool related to health expenditure and was fully funded by the CCGs.

51

9 Dedicated Schools Grant

Disclosure of deployment of Dedicated Schools Grant.

The Council’s expenditure on schools is funded primarily by the Department for Education, through the Dedicated Schools Grant (DSG). An element of DSG is recouped by the Department to fund academy schools in the Council’s area.

DSG is ring fenced and can only be applied to meet expenditure properly included in the Schools Budget, as defined in the School Finance (England) Regulations. The Schools Budget includes elements for a range of educational services provided on an authority wide basis and for the Individual Schools Budget (ISB), which is divided into a budget share for each maintained school.

Details of the deployment of DSG receivable for 2018-19 are as follows:

1) The actual DSG payments for 2018-19 comprised the following:

2018-19 payments (as above) 231,955

Adjustments for 2017-18 paid in 2018-19:

Early years (2,175)

Total 229,780

2) * The above table in year adjustments Includes :-

The estimated DSG Early Years grant adjustment for 2018-19 of £649k

(DSG grant repayment).

The actual DSG EY grant adjustment will be announced in July 2019

and paid in the 2019-20 financial year.

Note

Central Expenditure ISB Total

£000 £000 £000

Final DSG for 2018-19 before Academy recoupment 582,494

Academy figure recouped for 2018-19 (350,539)

Total DSG after Academy recoupment for 2018-19 231,955

Figure brought forward from 2017-18 as agreed with

the Department for Education. 3,490

Agreed initial budgeted distribution in 2018-19 80,927 154,517 235,444

In- year adjustments * (15,319) 15,968 649

Final budgeted distribution for 2018-19 65,608 170,485 236,093

Less: Actual central expenditure (62,838) 0 (62,838)

Less: Actual ISB deployed to schools 0 (170,485) (170,485)

Carry-forward to 2019-20 2,770 0 2,770

52

10 Grant Income

The Council credited the following grants, contributions and donations to the Comprehensive Income and Expenditure Account in 2018-19:

2017-18 2018-19

£000 £000Credited to Taxation and Non -Specific Grant Income

35,515 Revenue Support Grant 22,304

13,495 Non Ring Fenced Grants 9,599

44,439 Capital Grants 49,355

278,402 Precepts on Council Tax billing authority (Districts & Borough Authorities) 302,217

90,155 Business Rate Income 96,526

462,007 Total 480,001

Credited to Services

233,333 Dedicated Schools (DSG) 231,955

35,730 Public Health 34,784

17,613 PFI Credits 17,613

11,494 Improved Better Care Fund 15,264

6,484 Pupil Premium 11,177

0 Adult Social Care Winter Pressures 2,717

0 Universal Infant Free School Meals 4,258

3,141 Unaccompanied Asylum Seeking Children 2,843

0 Adult Social Care Grant 1,698

1,778 Schools Sixth Form Funding (EFA) 1,607

2,925 Skills Funding Agency 2,268

1,643 Troubled Families 1,506

10,863 Other Revenue Grants 8,345

25,525 Capital - DFE Freeschool funding 8,682

1,484 Capital - Culture Media & Sports- BDUK 860

0 Capital - DFG/Better Care Fund 4,182

9,556 Capital - Section 106 Developer Contributions 10,219

13,649 Capital - DFE Basic Need and Capital Maintenance 11,834

1,097 Capital - Early Years funding 916

1,027 Capital - Other Grants 2,412

377,342 375,142

839,348 Total 855,143

NB: The Disability Facilities Grant (DFG) for 2017-18 of £3,850k was included in the Capital

Grants balance of £44,439k. In 2018-19 this has been correctly identified within the Credited to Services section of the table above.

53

The Council has received a number of grants, contributions and donations that have yet to be recognised as income as they have conditions attached to them that may require the monies or property to be returned to the awarding body. The balances at the year end are as follows:

2017-18 2018-19

£'000 £'000

Capital Grants Receipts in Advance

42,271 Section 106 Developer Contributions 44,540

6,939 Single Local Growth Fund 2,965

3,127 Other Local Authorities 1,507

1,308 Homes and Communities Agency 1,308

291 DfT Maintenance 715

325 Department for Education - Early Learning for 2 Year Olds 0

241 Communities and Local Government Fire Capital Grant 207

184 Capitalisation Provision Redistribution Grant 0

601 Department for Education - UTCs grant + Partners contribution 0

6,938 Other Grants 3,396

62,225 Total 54,638

26,962 Current Liabilities 16,468

35,263 Long Term Liabilities 38,170

62,225 54,638

2017-18 2018-19

£'000 £'000

Revenue Grants Receipts in Advance

0 EU exit preparation grant 76

0 MHCLG -Domestic Abuse grant 65

473 Department for Education – High Needs Strategic Planning

Fund 0

475 Home Office – Firelink grant 0

116 DCLG - Fire Service Control Room Grant 0

426 Other grants 89

1,490 Total 230

11 Investment Properties

The following items of income and expenditure have been accounted for in the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement.

2017-18 2018-19

£000 £000

234 Rental income from investment property 374

(75) Direct operating expenses arising from investment property (41)

159 Net gain/(loss) 333

54

12 Capital Assets

20

17

-18

La

nd

an

d

Bu

ild

ing

s

Ve

hic

les

, P

lan

t,

Fu

rnit

ure

&

Eq

uip

me

nt

Infr

as

tru

ctu

re

As

se

ts

Co

mm

un

ity

As

se

ts

Su

rplu

s A

sse

ts

As

se

ts U

nd

er

Co

ns

tru

cti

on

To

tal

Pro

pe

rty

,

Pla

nt

an

d

Eq

uip

me

nt

Cost or Valuation £'000 £'000 £'000 £'000 £'000 £'000 £'000

At 1 April 2017 473,568 87,209 772,119 715 336 81,287 1,415,234

Additions 500 740 0 0 0 80,260 81,500

Donations 0 0 0 0 0 0 0

Revaluation increases/(decreases) recognised in the Revaluation Reserve 31,448 0 0 0 (324) 0 31,124

Revaluation increases/(decreases) recognised in the Surplus/Deficit on the Provision of Services (12,833) 0 0 0 (772) 0 (13,605)

Derecognition - Disposals (32,530) (4,382) 0 (30) (2) 0 (36,944)

Derecognitions - Other 0 (41,264) 0 0 0 (19,144) (60,408)

Asset reclassifications 43,063 6,470 41,804 0 1,364 (96,260) (3,559)

Other Movements in Cost or Valuation (1,033) 0 0 0 0 174 (859)

At 31 March 2018 502,184 48,773 813,923 685 602 46,317 1,412,483

Accumulated Depreciation and Impairment

At 1 April 2017 (45,191) (66,027) (178,559) (75) 0 0 (289,852)

Depreciation Charge/Amortisation (17,795) (5,603) (19,262) (15) (11) 0 (42,686)

Depreciation written out to the Revaluation Reserve 37,414 0 0 0 70 0 37,484

Depreciation written out to the Surplus/Deficit on the Provision of Services 22,193 0 0 0 38 0 22,231

Impairment (losses)/reversals recognised in the Revaluation Reserve 0 0 0 0 0 0 0

Impairment (losses)/reversals recognised in the Surplus/Deficit on the Provision of Services 0 0 0 0 0 0 0

Derecognition - Disposals 670 3,654 0 0 0 0 4,324

Derecognition - Other 0 40,379 0 0 0 0 40,379

to/(from) Property, Plant and Equipment 212 0 0 0 (97) 0 115

Other movements in Depreciation and Impairment 0 0 0 0 0 0

At 31 March 2018 (2,497) (27,597) (197,821) (90) 0 0 (228,005)

Net Book Value

At 31 March 2018 499,687 21,176 616,102 595 602 46,317 1,184,478

55

20

17

-18

Co

n't

Inta

ng

ible

As

se

ts

He

rita

ge

As

se

ts

Inv

es

tme

nt

Pro

pe

rtie

s

As

se

t h

eld

fo

r

Sa

le <

1 y

ea

r

To

tal

Ca

pit

al

PF

I A

ss

ets

Inc

lud

ed

in

La

nd

an

d B

uil

din

gs

PF

I A

ss

ets

Inc

lud

ed

in

Infr

as

tru

ctu

re

£'000 £'000 £'000 £'000 £'000 £'000 £'000

41,548 2,055 19,762 11,588 1,490,187 103,468 75,330

0 0 3,450 0 84,950 0 0

0 0 0 0 0 0 0

0 0 0 (2,319) 28,804 5,222 0

0 0 (3,568) (1,123) (18,296) 1,871 0

0 0 (1,343) (7,155) (45,440) 0 0

0 0 0 0 (60,408) 0 0

1,442 0 (928) 2,929 (115) 0 0

0 0 0 0 (859) 0 0

42,990 2,055 17,373 3,920 1,478,823 110,561 75,330

(35,018) 0 0 0 (324,869) (7,145) (4,321)

(3,106) 0 0 0 (45,792) (3,848) (1,883)

0 0 0 0 37,484 4,474 0

0 0 0 0 22,230 6,519 0

0 0 0 0 0 0 0

0 0 0 0 0 0 0

0 0 0 0 4,324 0 0

0 0 0 0 40,379 0 0

0 0 0 0 115 0 0

0 0 0 0 0 0 0

(38,124) 0 0 0 (266,129) 0 (6,204)

4,866 2,055 17,373 3,920 1,212,694 110,561 69,126

56

20

18

-19

La

nd

an

d

Bu

ild

ing

s

Ve

hic

les

, P

lan

t,

Fu

rnit

ure

&

Eq

uip

me

nt

Infr

as

tru

ctu

re

As

se

ts

Co

mm

un

ity

As

se

ts

Su

rplu

s A

sse

ts

As

se

ts U

nd

er

Co

ns

tru

cti

on

To

tal

Pro

pe

rty

,

Pla

nt

an

d

Eq

uip

me

nt

Cost or Valuation £'000 £'000 £'000 £'000 £'000 £'000 £'000

At 1 April 2018 502,184 48,773 813,924 685 602 46,317

1,412,485

Additions 0 0 0 0 0 59,842 59,842

Transfers (26,031) (18,578) 0 0 0 0 (44,610)

Revaluation increases/(decreases) recognised in the Revaluation Reserve 8,282 0 0 0 59 0 8,341

Impairment eliminated on Revaluation (690) 0 0 0 0 0 (690)

Revaluation increases/(decreases) recognised in the Surplus/Deficit on the Provision of Services 14,875 0 0 0 0 0 14,875

Derecognition - Disposals (90,605) (489) 0 0 0 0 (91,093)

Derecognitions - Other 0 0 0 0 0 (882) (882)

Asset reclassifications 9,626 6,935 64,828 0 885 (85,279) (3,006)

Other Movements in Cost or Valuation 0 0 0 0 0 0

At 31 March 2019 417,642 36,641 878,752 685 1,546 19,998 1,355,26

2

Accumulated Depreciation and Impairment

At 1 April 2018 (2,498) (27,596) (197,821) (90) (0) 0 (228,005)

Depreciation Charge/Amortisation (18,543) (5,965) (20,307) (12) 0 0 (44,827)

Transfers 0 10,833 0 0 0 0 10,833

Depreciation written out to the Revaluation Reserve 12,834 0 0 0 0 0 12,834

Depreciation written out to the Surplus/Deficit on the Provision of Services 4,063 0 0 0 0 0 4,063

Derecognition - Disposals 1,154 275 0 0 0 0 1,429

Derecognition - Other 856 0 0 0 0 0 856

Other movements in Depreciation and Impairment 0 0 0 0 0 0 0

At 31 March 2019 (2,134)

(22,454) (218,128) (102) (0) 0 (242,817)

Net Book Value

At 31 March 2019 415,508

14,186 660,624 584 1,546 19,998 1,112,445

57

20

18

-19

Co

n't

Inta

ng

ible

As

se

ts

He

rita

ge

As

se

ts

Inv

es

tme

nt

Pro

pe

rtie

s

As

se

t h

eld

fo

r

Sa

le <

1 y

ea

r

To

tal

Ca

pit

al

PF

I A

ss

ets

Inc

lud

ed

in

La

nd

an

d B

uil

din

gs

PF

I A

ss

ets

Inc

lud

ed

in

Infr

as

tru

ctu

re

£'000 £'000 £'000 £'000 £'000 £'000 £'000

42,990 2,055 17,373 3,920 1,478,823 110,561 75,330

0 0 0 0 59,842 0 0

0 0 0 0 (44,610) 0 0

0 0 0 1,032 9,373 2,744 0

0 (0) (0) (148) (838) 0 0

0 0 454 (456) 14,873 715 0

(331) (6,382) (97,806) (14,536) 0

0 0 0 0 (882) 0 0

2,998 (3,410) 3,688 270 62 0

1 1 1 3 0 0

45,989 2,055 14,085 1,656 1,419,048 99,546 75,330

(38,124) 0 0 0 (266,130) 0 (6,204)

(2,939) 0 0 0 (47,808) (4,467) (1,883)

0 0 0 0 10,833 0 0

0 0 0 0 12,834 3,018 0

0 0 0 0 4,063 1,011 0

0 0 0 0 1,429 438 0

0 0 0 0 856 0 0

0 0 0 0 0 0 0

(41,063) 0 0 0 (283,922) (0) (8,087)

4,926 2,055 14,085 1,656 1,135,126 99,546 67,243

58

13 Property Valuation

The following statement shows the progress of the Council's rolling programme for the revaluation of fixed assets. The basis for valuation is set out in the Statement of Accounting Policies. Assets valued for 2018-19 have all been valued at 31 March 2019. This covers Property, Plant and Equipment, Investment Properties and Assets Held for Sale and operational dates for New Constructions and Heritage Assets.

The valuations for 2014-15 were completed by NPS Property Consultants. The valuations for 2015-16, 2016-17, 2017-18 and the current year were carried out by Wilkes, Head and Eve LLP.

Valued at Historical

Cost 2014-15 2015-16 2016-17 2017-18 2018-19 Total Property, Plant and Equipment £000 £000 £000 £000 £000 £000 £000

Land & Buildings 22 0 11,286 9,198 5,652 291,937 318,095

PFI 0 0 0 0 0 99,546 99,546 Plant, Vehicle & Equipment 36,641 0 0 0 0 0 36,641

Infrastructure 878,752 0 0 0 0 0 878,752

Community 685 0 0 0 0 0 685

Surplus Assets 0 0 0 0 0 1,546 1,546

Intangible Assets 45,988 0 0 0 0 0 45,989 Assets Under Construction 19,998 0 0 0 0 0 19,998

Total PPE 982,087 0 11,286 9,198 5,652 393,029 1,401,253

Heritage Assets 1,526 0 514 0 0 15 2,055

Investment Properties 0 0 0 0 0 14,085 14,085

Assets Held for Sale 0 0 0 0 0 1,656 1,656

1,526 0 514 0 0 15,756 17,796

Total 983,613 0 11,800 9,198 5,652 408,785 1,419,048

59

Fair Value Hierarchy

All the Council’s investment and surplus properties have been value assessed as Level 2 on the fair value hierarchy for valuation purposes (see Appendix 1.4.29 Fair Value Measurement for an explanation of the fair value levels).

Valuation Techniques Used to Determine Level 2 Fair Values for Investment Property/Surplus Assets The fair value of investment property has been measured using a market approach, which takes into

account quoted prices for similar assets in active markets, existing lease terms and rentals, research into market evidence including market rentals and yields, the covenant strength for existing tenants, and data and market knowledge gained in managing the Council’s Investment Asset portfolio. Market conditions are such that similar properties are actively purchased and sold and the level of observable inputs are significant, leading to the properties being categorised as level 2 on the fair value hierarchy. There has been no change in the valuation techniques used during the year for investment and surplus properties.

Highest and Best Use In estimating the fair value of the Council’s investment and surplus properties, the

highest and best use is their current use. Since the date of valuations, the Council has no information of any material change in value and therefore the valuations have not been updated.

14 Intangible Assets The most significant items capitalised are:

Carrying Amount Remaining Amortisation Period at 31 March 2019

31st March

2018 31st March

2019

£000 £000

Project Angel & New Ways of Working 812 411 1 Year

15 Capitalisation of Borrowing Costs

The Council has capitalised borrowing costs of £612k during the financial period 2018-19. The capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation for the 2018-19 financial period, calculated using the weighted average interest rate on the Council’s loan payments, was 3.30%.

60

16 Commitments under Capital Contracts

The Council allocates and controls its available resources for capital expenditure via an ongoing capital programme. The total value of capital expenditure programmes to be completed in 2018-19 and later years is £194m. This reflects all Cabinet approved capital commitments that have been through the required governance process.

Schemes entered into during 2018-19 or earlier, where significant payments remain to be made, are identified below along with its purpose, approximate value and the period over which the investment will take place.

Project/ Scheme Name

Main Contractor

Purpose Expected

Completion

Approximate Contract

Value £000

Total Scheme

Value £000

A43 Northampt

on to Kettering phase 1b

Balfour Beatty

Improvements to the A43 between Northampton and Kettering are a high priority scheme for the County Council, featuring in the Northamptonshire Arc and the Northamptonshire Transportation Plan. The scheme has been split into a number of phases in order to tackle initial congestion hotspots and in accordance with the funding available.

Phase 1b consists of a new dual carriageway linking the Round Spinney roundabout with a slightly relocated Moulton roundabout.

2019-20 8,605 17,456

Northamptonshire

Superfast Broadband

BT & Gigaclear

This scheme will deliver the roll out of superfast broadband to provide coverage of the ‘white areas’ of the county. National Government through BDUK plans to ensure the UK has the best broadband network in Europe and this scheme will provide the infrastructure for areas not already being planned under existing commercial rollouts. There is a requirement for local investment to match BDUK grants to fill the gap in financial viability for commercial delivery

2020-21

21,450

22,426

Chester Farm

Shaylor Group Ltd

The Chester Farm project will see the development of this outstanding heritage site as a place for learning, participation and leisure. The scheme is funded by Heritage Lottery Fund and Northamptonshire County Council.

2019-20 8,800 11,100

61

17 Financial instruments

Financial Instrument Balances

The borrowings and investments disclosed in the Balance Sheet are made up of the following categories of financial instruments:

Long-Term

Current

31-Mar-17 31-Mar-18 31-Mar-19 31-Mar-17 31-Mar-18 31-Mar-19

£0 £0 £0 £0 £0 £0

Borrowings

Financial liabilities at amortised cost

346,582 348,547 341,238 183,360 255,560 239,354

Total borrowings 346,582 348,547 341,238 183,360 255,560 239,354

Current Creditors

Creditors less receipts in advance

0 0

111,577

111,060

102,509

Total Current Creditors 0 0 0 111,577 111,060 102,509

Other Long Term Liabilities

Leases 8 4 0 225 229 207

PPP/PFI Liabilities 186,771 179,194 171,609 6,842 7,268 4,145

Total Other Long Term Liabilities

186,779 179,198 171,609 7,067 7,497 4,352

Investments

Investments held at Amortised Cost

0 0 0 33,050 36,850 34,088

Unquoted Equity Investment at Cost

200 200 200 0 0 0

Total investments 200 200 200 33,050 36,850 34,088

Debtors

Debtors less Payments in Advance

7,351 15,157 7,399 89,679 94,077 99,249

Long Term Debtors 15,963 14,783 21,246 0 0 0

Total Debtors 23,314 29,940 28,645 89,679 94,077 99,249

Note– Two loans to the University of Northampton (UoN) totalling £22m to develop the Waterside Campus were advanced in March 2016 and December 2017 respectively. The loans are fully guaranteed by HM Treasury under the Government’s UK Guarantee Scheme. Repayments are made on an annuity basis over the life of the loans. These loans have been classified as long term debtors.

62

Gains and Losses on Financial Instruments

The gains and losses recognised in the CIES and Movement in Reserves Statement in relation to financial instruments are made up as follows:

31-Mar-18 31-Mar-19 31-Mar-18 31-Mar-19 31-Mar-18 31-Mar-19

Financial Liabilities Financial Assets

Measured at

amortised cost

Measured at

amortised cost

Loans and receivables

Loans and receivables

Available for Sale Assets


£000 £000 £000 £000 £000 £000

Interest expense (19,968) (18,273) 0 0 0 0

Losses on derecognition

0 0 0 0 0 0

PFI/PPP (19,885) 0 0 0 0 0

Interest payable and similar charges

(39,853) (18,273) 0 0 0 0

Interest income 0 0 569 1,006 0 0

Gains on derecognition

0 0 0 0 0 0

Interest and investment income

0 0 569 1,006 0 0

Net gain/(loss) for the year

(39,853) (18,273) 569 1,006 0 0

Total

Carrying

amount

Fair value

Total

Carrying

amount

Fair value

£000 £000 £000 £000

Long term Borrowing 307,455 415,233 341,238 470,370

Short term borrowing 296,651 439,717 239,117 302,972

Short term creditors 111,060 111,060 118,429 118429

Short term finance lease

& PFI liability7,497 7,497 4,352 4,352

Long term finance lease

& PFI liability179,198 178,198 171,611 171,611

Financial liabilities 901,861 1,151,705 874,747 1,067,734

Carrying

amountFair value

Carrying

amountFair value

£000 £000 £000 £000

Investments held at

Amortised Cost36,850 36,850 34,088 34,088

Long term debtors 14,783 14,783 21,246 21,246

Municipal Bonds Agency 200 200 200 200

Financial Assets 51,833 51,833 55,534 55,534

31-Mar-18 31-Mar-19

31-Mar-18 31-Mar-19

63

The fair value of the assets is the same as the carrying amount because the Council’s portfolio of held at amortised cost is a fair approximation of their value. The fair value of long term debtors is also taken to be the carrying amount. The Council’s portfolio of loans includes a number of fixed rate loans where the interest rate payable is higher than the rates available for similar loans in the market at the balance sheet date. This shows a notional loss (based on economic conditions) arising from a commitment to pay interest to lenders above current market rates. The fair value of PWLB loans at new loan rates was £443m. This represents the economic effects of the terms agreed with the PWLB compared with estimates of the terms that would be offered for market transactions undertaken at the Balance Sheet date. The difference between the carrying amount and the fair value measures the additional interest that the authority will pay over the remaining terms of the loans under the agreements with the PWLB, against what would be paid if the loans were at prevailing market rates. However, as the Debt Management Office provides a transparent approach allowing exit cost to be calculated without undertaking a repayment or transfer, it is also appropriate to disclose this exit price. The exit price reflects the fair value of PWLB loans calculated using early redemption rates instead of new loan rates. If a value is calculated on this basis, the carrying amount of £325m would have cost £529m to redeem early at the Balance Sheet date.

64

18 Debtors and Payments in Advance

18.1 Long term debtors

Long Term Debtors are debts that are not expected to be paid within the next 12 months. Any debts expected to be collected within the next 12 months are shown within the accounts as Short Term debtors. As at the 31st March 2019, the value of long term debtors increased to £37.5m (from £29.9m as at the 31st March 2018). The Other Entities and Individuals figure as at 31 March 2019 includes £3.2m of deferred accommodation charges of which £0.3m is not secured by way of a legal charge. These relate to clients that own their own property and enter a residential care home. The Council will treat that customer as being liable for the full cost of their care charges due to the value of their assets. As the capital is tied up in the property the Council charges a contribution based on the client’s accessible income, with the remainder being deferred against the property until such time as the property sells. The debt is secured by way of legal charge and therefore is recoverable in most cases. The remainder of the Other Entities and Individuals figure represents £30.4m of loans issued by the Council, including £22m to the University of Northampton. See Note 17 for further details. The £3.9m figure for Other Local Authorities represents lease premiums for long term leases of library buildings. These are being written down over the period of the lease.

18.2 Short term debtors

The short term debtors figure for Other Local Authorities is primarily comprised of precepts from Council Tax and Business Rates billing authorities, which are paid in the following financial year. The majority of the remainder is made up of debts from Cambridgeshire County Council, Milton Keynes Council and Northampton Borough Council which together total £11.4m. .

65

19 Short Term Creditors and Receipts In Advance

20 Cash and Cash Equivalents

Cash figures are shown net of overdrafts.

2017-18 2018-19

£'000 £'000

33,232 Cash in Hand 48,951

(3,839) Bank Current Accounts 0

29,393 Total Cash & Cash Equivalents 48,951

66

21 Provisions

21.1 Insurance Provision The Insurance Provision is held to fund the payment of known estimated future insurance liabilities (public liability, employer’s liability and property) i.e. estimates against current open insurance claims. Dependent on the type of claim claimants have up to six years to make a claim. The claim may then take a number of years to settle. The balance held in the Insurance Provision is based on estimates of liability of known claims and therefore represents the liability that NCC will be required to pay impacting in future financial years.

21.2 Business Rates Provision

Business Rate payers may appeal to the Valuation Office against their business rates bill. If their appeal is successful it could lead to a reduction in the rateable value of their property and thus a reduction in the amount of business rates income received by the Council. Business Rates billing authorities within the county (Borough and District Councils) inform the Council of the level of outstanding appeals within their area. This information is used to ensure that an appropriate level of provision is maintained within the Council’s accounts in respect of business rates appeals.

21.3 Other Provisions

Less than One Year – £288k of provision is to cover for possible future costs of Northampton Fire and Rescue Service (NFRS) transfer. £119k of decommissioning provision, £55k for schools in possible financial difficulties and other £11k.

Provisions (<1 yr)

InsuranceBusiness

Rates

Public

HealthLegal Other

Provision Provision Provision Provision Provisions Total

£'000 £'000 £'000 £'000 £'000 £'000

Balance at April 2018 (850) 0 (8,000) 0 (581) (9,431)

Additional Provisions made in 2018-19 0 0 0 (390) (390) (780)

Amounts used in 2018-19 0 0 772 0 408 1,180

Unused amounts reversed in 2018-19 (233) 0 0 0 0 (233)

Balance at March 2019 (1,083) 0 (7,228) (390) (563) (9,264)

Provisions (>1 yr)

InsuranceBusiness

Rates

Public

HealthOther

Provision Provision Provision Provisions Total

£'000 £'000 £'000 £'000 £'000 £'000

Balance at April 2018 (5,430) (3,351) 0 (139) (8,920)

Additional Provisions made in 2018-19 0 0 0 0 0

Amounts used in 2018-19 0 0 0 49 49

Unused amounts reversed in 2018-19 291 0 0 0 291

Balance at March 2019 (5,139) (3,351) 0 (90) (8,580)

67

22 Contingent Liabilities

22.1 McCloud/Sargeant judgement December 2018

Background

McCloud

Before 1 April 2015, the claimants in McCloud were all members of the Judicial Pension Scheme (“JPS”). The JPS was closed on 31 March 2015 and serving judges were compulsorily transferred into a replacement scheme, the New Judicial Pension Scheme.

Transitional provisions were put in place to allow older judges to remain members of the JPS, either until retirement (“full protection members”) or until the end of a period of tapered protection of approximately ten years (“tapered protection members”), depending on their age. Sargeant

The claimants in Sargeant were all members of the Firefighters’ Pension Scheme. The Court of Appeal (“CA”) has held that the transitional provisions which were put in place as part of reforms to both the Judicial and Firefighters’ Pension Schemes constitute unlawful direct age discrimination.

In March 2011, the Hutton Report recommended wholesale public sector pension reform, with a view to putting public sector pension schemes on a more sustainable footing. The government enacted reforms through the Public Sector Pensions Act 2013, as a result of which the Firefighters’ Pension Scheme 2015 was introduced.

As in McCloud, transitional measures (which also gave full or tapering protection to members approaching their “normal pension age”) sought to minimise the impact of the reforms for older firefighters.

Outcome

In both cases it was common ground that the claimants had been treated less favourably on the grounds of age. The issue was whether this less favourable treatment could be objectively justified.

In the firefighters’ case, the Employment Appeal Tribunal has decided that the Employment Tribunal (ET) was right to conclude that the government was pursuing legitimate aims. However, the ET failed to apply the correct level of scrutiny in considering whether the transitional provisions were a proportionate means of achieving the government’s legitimate aims. The case will therefore be returned to the ET for consideration of whether the transitional provisions were a proportionate means of achieving the legitimate aims of the government.

In the firefighters’ case, the question of whether the transitional provisions were a proportionate means of achieving the government’s aims will now be considered afresh by the ET. The government intends to appeal both cases, and a final resolution has not yet been reached but the pensions disclosures included within these statement have been adjusted to reflect an increasing pension liability as a result of the courts decision in the case, with the latest actuary report received in July 2019 being used to calculate the required accounting entries.

68

23 Other Long Term Liabilities 2017-18 2018-19

£'000 £'000

(179,194) Long Term PFI Liabilities (171,611)

(1,748) Deferred liabilities (1,688)

0 Deferred Income (16,176)

(4) Finance Lease Liabilities 0

(747,459) Pension liabilities (583,438)

(928,406) Total (772,913)

The 16.2m of deferred income relates to the surplus consideration above fair value in relation to the Sale and Leaseback of One Angel Square. The accounting treatment of this is detailed in page 17.

24 Private Finance Initiatives (PFI) and similar contracts

The Council has entered into the following Private Finance Initiatives (PFI):

The Wooldale Centre;

Residential Care Homes;

The Northampton Town Learning Partnership;

Shaw Elderly Persons Homes (EPH) ;

Street Lighting.

The assets used to provide services under these PFI contracts are recognised in the Council’s Balance Sheet. Movements in their value over the year are detailed in the analysis of the movement on the Property, Plant and Equipment balance in Note 12. Unless stated otherwise in the notes below, all assets funded utilising PFI funding arrangements:-

Have not changed during the current financial year;

Include no material additional rights or obligations to either party than otherwise disclosed;

Include no provision for renewal or termination options, in addition to no material rights or assets upon completion of the contract;

Require either party to acquire or build assets during the duration of the contract.

The Council makes an agreed annual payment which is increased each year by inflation and can be reduced if the contractor fails to meet availability and performance standards in any year but which is otherwise fixed. Payments remaining to be made under these PFI contracts at 31 March 2019 (excluding any estimation of inflation and availability/performance deductions) are shown in the following table.

Payment for

services

Reimbursement of Capital

Expenditure Interest Total

£000 £000 £000 £000

Payable in 2019/20 13,479 1,470 2,674 17,623

Payable within two to five years 58,362 6,104 10,927 75,393

Payable within six to ten years 82,291 9,281 14,728 106,299 Payable within eleven to fifteen years 48,206 6,823 10,659 65,688 Payable within sixteen to twenty years 14,522 2,136 2,920 19,577

216,859 25,813 41,908 284,581

69

The following paragraphs provide a high level summary of the individual PFI contracts.

Wooldale Centre – This agreement was entered into on 28 March 2003 with Wooldale Partnerships Ltd to build and operate the ‘Wooldale Centre for Learning’, which comprises the Caroline Chisholm secondary and primary school, a public library and various pre-school and community facilities at Wootton Fields. The contract is due to end on 31 August 2029 and the total remaining payments are £43.0k.

As Caroline Chisholm School converted to academy status on the 1 August 2011, its assets are not recognised on the Council’s Balance Sheet. However, the associated liabilities are recognised, as the contractor has met its contractual commitment and there is no recourse to the school for any future payments. The subsequent loss that this accounting treatment creates is expensed through the Comprehensive Income and Expenditure Statement and financed as Revenue Expenditure Funded as Capital Under Statute (REFCUS).

Residential Care Homes (Specialist Care Centres) – In January 2003 the Council entered into a PFI agreement with Shaw Healthcare to build and operate four specialist care centres. The centres are operational and will be operated until the financial year 2029/30 with payments remaining totalling £105.3m. PFI credits to the value of £1.3m per annum will be received over the 25 year period.

Northampton Town Learning Partnership – On 31 December 2005 the Council entered into a PFI agreement with Northampton Schools Ltd Partnership to build/refurbish and operate 5 secondary schools and 36 primary schools in Northampton town. The PFI completion date is 1 January 2038 and the remaining payments total £613.6k. Some schools in the contract are being extended under the contract to meet the basic need provision for school places in Northampton town.

Shaw Elderly Persons Homes (EPH) – The Shaw EPH scheme is a Public Private Partnership (PPP) involving the transfer of 8 elderly person’s’ homes to Shaw Healthcare (De Montfort) Limited. The Council has a 30 year contract with Shaw under which the developer provides a specified number of beds at each home at a specified price to the Council. The assets used to provide services under this contract are recognised on the Council’s Balance Sheet, although the assets will be owned by the developer at the end of the contract. Payments to the end of the contract in financial year 2036/37 total £178.5m.

Street Lighting PFI Scheme – The Street Lighting PFI Contract is a partnership with Balfour Beatty running for 25 years from 1 October 2011 to 30 September 2036. The PFI element of the contract covers the maintenance of existing and new lighting units, and the replacement of current lighting units requiring replacement on a gradual basis over the first 5 years of the contract.

Outside of the PFI element of the contract but closely related, forming part of the wider contract and affecting the assets utilised, is the energy consumption of the street lighting units. There are related performance targets to reduce energy consumption with the new units.

The value of the contract will change over the period of the contract as new housing developments are built and the related street lighting stock adopted by the Council. Although the contract requires maintenance of the entire street lighting stock and replacement of existing equipment beyond its useful life, ownership of the street lighting asset is retained by the County Council. The remaining payments total £173.3k.

70

25 Leases

25.1 Council as Lessee

1. Finance Leases

The Council has acquired a number of items of equipment under finance leases. The assets acquired under these leases are carried as Property, Plant and Equipment in the Balance Sheet at the following net amounts.

The Authority has acquired a number of vehicles under finance leases.The assets acquired under these leases are carried as Property, Plant and Equipment in the Balance Sheet at the following net amounts.

2017/18 Finance lease liabilities (net present value of minimum lease payments) 2018/19

£000 £000

35 Current (payment in 18/19) 32

76 Non-Current (payment from 18/19 onwards) 70

8 Finance costs payable in future years 4

119 Minimum lease payments 106

The Authority is committed to making minimum payments under these leases comprising settlement of the long-term liability for the interest element of the leases acquired by the Authority, and finance costs that will be payable by the Authority in future years while the liability remains outstanding. The minimum lease payments are made up of the following amounts:

Minimum Lease Payments (with interest)

Finance Lease

Liabilities (without interest)

Minimum Lease

Payments (with interest)

Finance Lease

Liabilities (without interest)

2017/18 2017/18 2018/19 2018/19

£000 £000 £000 £000

38 35 Not later than one year 34 32

81 71

Later than one year and not later than five years 71 70

119 106 Total 106 102

Operating Leases

The future minimum payments due under operating leases in future years are:

2017/18 2018/19

£000 £000

928 Not later than one year (payments) 3,196

2,143 Later than one year and not later than five years 42,412

4,234 Later than five years 83,870

7,304 129,478

2017/18 Cost of Finance Lease Assets 2018/19

£000 £000

172 Plant, Furniture, Equipment 140

172 140

71

The expenditure charged to various service lines in the Comprehensive Income and Expenditure Statement during the year in relation to these leases was:

2017/18 2018/19

£000 £000

217 Minimum lease payments 2,941

Contingent rents

(Sublease payments receivable)

25.2 Council as Lessor

I. Finance Leases

The Authority as a Lessor does not have any leases that have been classified as Finance Leases.

II. Operating Leases

The future minimum lease payments receivable under operating leases in future years are:

2017/18 2018/19

£000 £000

(931) Not later than one year (921)

(2,303) Later than one year and not later than five years (1,917)

(1,034) Later than five years (1,832)

(4,268) (4,669)

Minimum lease receipts for current year

2017/18 2018/19

£000 £000

(953)

Total amounts receivable in respect of

leases (1,032)

72

26 Reserves

Usable Reserves

Total Usable Reserves have increased by £55.2m, largely reflecting the capitalisation direction received in year. In line with the direction, the general fund position is now a positive balance of £20.0m, while the earmarked reserves stand at £19.9m.

Movements in the Council’s usable reserves are detailed in the Movement in Reserves Statement, note 27 and note 28.

Unusable Reserves

26.1 Revaluation Reserve

The Revaluation Reserve contains the gains made by the Council arising from increases in the value of its Property, Plant and Equipment. The balance is reduced when assets with accumulated gains are:

Revalued downwards or impaired and the gains are lost;

Used in the provision of services and the gains are consumed through depreciation; or

Disposed of and the gains are realised.

The Reserve contains only revaluation gains accumulated since 1 April 2007, the date that the Reserve was created. Accumulated gains arising before that date are consolidated into the balance on the Capital Adjustment Account.

2017-18 2018-19

£'000 £'000

(35,304) General Fund 20,000

3,243 Earmarked Reserves 19,856

21,091 Schools Reserves 21,062

16,998 Capital Receipts Reserve 3,232

25,063 Capital Grants Unapplied 22,891

31,091 Total Usable Reserves 87,041

2017-18 2018-19

£'000 £'000

163,892 Revaluation Reserve 138,036

190,622 Capital Adjustment Account 139,058

(236) Financial Instruments Adjustment Account (4,395)

(747,458) Pensions Reserve (583,438)

3,722 Collection Fund Adjustment Account 4,750

0 Deferred Capital Receipts Reserve 7,748

(4,112) Accumulated Absences Account (4,935)

(393,570) Total Unusable Reserves (303,175)

73

2017-18 2018-19

£'000 £'000

117,089 Balance at 1 April 163,892

85,222 Upward revaluation of assets 32,525

(20,921)

(10,944)

64,301 21,581

(4,702)(6,676)

(12,796) (40,761)

(17,498) (47,437)

163,892 Balance at 31 March 138,036

Accumulated gains on assets sold or scrapped

Downward revaluation of assets and impairment losses

not charged to the Surplus/Deficit on the Provision of

Services

Surplus or (deficit) on revaluation of non-current assets not

posted to the Surplus or Deficit on the provision of

Services

Difference between fair value depreciation and historical

cost depreciation

Amount written off to the Capital Adjustment Account

74

26.2 Capital Adjustment Account

The Capital Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for the consumption of non current assets and for financing the acquisition, construction or enhancement of these assets under statutory provision. The Account is debited with the cost of acquisition, construction or enhancement as depreciation, impairment losses and amortisations are charged to the Comprehensive Income and Expenditure Statement (with reconciling postings from the Revaluation Reserve to convert fair value figures to a historical cost basis). The Account is credited with the amounts set aside by the Council as finance for the costs of acquisition, construction and enhancement.

The Account contains accumulated gains and losses on Investment Properties and gains recognised on donated assets that have yet to be consumed by the Council. The Account also contains revaluation gains accumulated on Property, Plant and Equipment before 1 April 2007, the date that the Revaluation Reserve was created to hold such gains. Note 26 provides details of the source of all the transactions posted to the Account, apart from those involving the Revaluation Reserve.

2017-18 2018-19

£'000 £'000

234,879 Balance at 1 April 190,621

(57,342) (44,826)

5,168 18,271

(3,106) Amortisation of intangible assets (2,939)

(59,879) (35,222)

(41,799) (129,298)

(156,958) Total (194,014)

17,498 47,437

(139,460) (146,577)

Capital financing applied in the year:

91,58593,204

7,175 1,355

98,760 Total 94,559

(3,558)

454

190,621 Balance at 31 March 139,057

Charges for depreciation and impairment of non current

assets

Revenue expenditure funded from capital under statute

Reversal of items relating to capital expenditure

debited or credited to the Comprehensive Income

and Expenditure Statement:

Movements in the market value of Investment Properties

debited or credited to the Comprehensive Income and

Expenditure Statement

Revaluation losses on Property, Plant and Equipment

Amounts of non current assets written off on disposal or

sale as part of the gain/loss on disposal to the


Net written out amount of the cost of non current assets

consumed in the year

Application of grants to capital financing from the Capital

Grants Unapplied Account

Statutory provision for the financing of capital investment

charged against the General Fund balances

Adjusting amounts written out of the Revaluation Reserve

75

26.3 Financial Instruments Adjustment Account

The Financial Instruments Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for income and expenses relating to certain financial instruments and for bearing losses or benefiting from gains per statutory provisions. The Council uses the Account to manage premiums paid on the early redemption of loans.

Premiums are debited to the Comprehensive Income and Expenditure Statement when they are incurred, but reversed out of the General Fund Balance to the Account in the Movement in Reserves Statement. Over time, the expense is posted back to the General Fund Balance in accordance with statutory arrangements for spreading the burden on Council tax. In the Council’s case, this period is the unexpired term that was outstanding on the loans when they were redeemed.

2017-18 2018-19

£'000 £'000

638 Balance at 1 April (236)

(874) Amount by which finance costs charged to Comprehensive Income and Expenditure Statement are different from costs chargeable in the year in accordance with statutory requirements.

(4,159)

(236) Balance at 31 March (4,395)

26.4 Pension Reserve

The Pensions Reserve absorbs the timing differences arising from the different arrangements for accounting for post employment benefits and for funding benefits in accordance with statutory provisions. The Council accounts for post employment benefits in the Comprehensive Income and Expenditure Statement as the benefits are earned by employees accruing years of service, updating the liabilities recognised to reflect inflation, changing assumptions and investment returns on any resources set aside to meet the costs. However, statutory arrangements require benefits earned to be financed as the Council makes employer’s contributions to Pension Funds or eventually pays any pensions for which it is directly responsible. The credit balance on the Pensions Reserve, therefore, shows a substantial shortfall in the benefits earned by past and current employees and the resources the Council has set aside to meet them. The statutory arrangements will ensure that funding will have been set aside by the time the benefits come to be paid.

2017-18 2018-19

£'000 £'000

(740,531) (747,459)

25,384 (85,026)

(69,572) (58,105)

37,260 31,012

0 276,140

(747,459) Balance at 31 March (583,438)

Balance at 1 April

Reversal of items relating to retirement benefits debited or

credited to the Surplus or Deficit on the Provision of

Services in the Comprehensive Income and Expenditure

Statement

Employer's pensions contributions and direct payments to

pensioners payable in the year

Actuarial gains or losses on pensions assets and

liabilities

Firefighters Pension Liability transfer

76

26.5 Collection Fund Adjustment Account

The Collection Fund Adjustment Account manages the differences arising from the recognition of Council Tax and Business Rates income in the Comprehensive Income and Expenditure Statement as it falls due from Council Tax and Business Rates payers compared with the statutory arrangements for paying across amounts to the General Fund from the Collection Fund.

26.6 Accumulated Absences Account

The Accumulated Absences Account absorbs the differences that would otherwise arise on the General Fund Balance from accruing for compensated absences earned but not taken in the year e.g. annual leave entitlement carried forward at 31 March. Statutory arrangements require that the impact on the General Fund Balance is neutralised by transfers to or from the Account.

77

27 Adjustments Between Accounting Basis and Funding Basis under Regulations

This note details the adjustments that are made to the total comprehensive income and expenditure recognised by the Council in the year in accordance with proper accounting practice to the resources that are specified by statutory provisions as being available to the Council to meet future capital and revenue expenditure.

2017-18

Ge

ne

ral

Fu

nd

Ba

lan

ce

Ca

pit

al

Re

ce

ipts

Re

se

rve

Ca

pit

al

Gra

nts

Un

ap

pli

ed

Mo

vem

en

t

in

Un

us

ab

le

Re

se

rve

s

£000 £000 £000 £000

Adjustments Involving the Capital Adjustment Account

Reversal of items debited or credited to the Comprehensive Income and Expenditure Statement:

Charges for depreciation and impairment of non current assets 57,340 0 0 (57,340)

Revaluation losses on Property Plant and Equipment (5,168) 0 0 5,168

Movements in the fair value of Investment Properties 3,558 0 0 (3,558)

Amortisation of intangible assets 3,106 0 0 (3,106)

Capital grant and contributions applied (96,777) 0 0 96,777

Income in relation to donated assets 0 0 0 0

Revenue Expenditure funded from Capital under Statute 59,879 0 0 (59,879) Amounts of non current assets written off on disposal or sale as part of the gain/loss on disposal to the Comprehensive Income and Expenditure Statement

41,799 0 0 (41,799)

Insertion of items not debited or credited to the Comprehensive Income and Expenditure Statement:

Statutory Provision for the Repayment of debt - Minimum Revenue Provision (MRP)

(7,175) 0 0 7,175

Other Adjustments

Adjustments involving the Capital Grants Unapplied Account:

Capital grants and contributions unapplied credited to the Comprehensive Income and Expenditure Statement

0 0 0 0

Application of grants to capital financing transferred to the Capital Adjustment Account

0 0 5,192 (5,192)

Adjustments involving the Capital Receipts Reserve: Reversal of Capital Receipts Reserve Use to Fund Transformation Schemes (16,998) 16,998 0 0 Capital Receipts credited to Comprehensive Income & Expenditure Statement (9,618) 9,618 0 0

Flexible use of Capital Receipts Reserve to finance revenue expenditure 9,618 (9,618) 0 0 Adjustments involving the Financial Instruments Adjustment Account:

Amount by which finance costs charged to the Comprehensive Income and Expenditure Statement are different from finance costs chargeable in the year in accordance with statutory requirements

874 0 0 (874)

Adjustments involving the Pensions Reserve:

Reversal of items relating to retirement benefits debited or credited to the Comprehensive Income and Expenditure Statement

69,572 0 0 (69,572)

Employer's pension contributions and direct payments to pensioners payable in the year

(37,260) 0 0 37,260

Adjustments involving the Collection Fund Adjustment Account:

Amount by which council tax income credited to the Comprehensive Income and Expenditure Statement is different from council tax income calculated for the year in accordance with statutory requirements

979 0 0 (979)

Adjustment involving the Accumulated Absences Account:

Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements

188 0 0 (188)

Total Adjustments 73,917 16,998 5,192 (96,108)

78

2018-19

Gen

era

l

Fu

nd

Bala

nce

Cap

ital

Receip

ts

Reserv

e

Cap

ital

Gra

nts

Un

ap

pli

e

d Mo

vem

e

nt

in

Un

usab

le

Reserv

es

£'000 £'000 £'000 £'000

Adjustments Involving the Capital Adjustment Account

Reversal of items debited or credited to the Comprehensive Income and Expenditure Statement:

Charges for depreciation and impairment of non current assets 44,837 0 0 (44,837)

Revaluation losses on Property Plant and Equipment (18,725) 0 0 18,725

Movements in the fair value of Investment Properties 2,787 0 0 (2,787)

Amortisation of intangible assets 152 0 0 (152)

Capital grant and contributions applied 0 0 0 0

Income in relation to donated assets 0 0 0 0

Revenue Expenditure funded from Capital under Statute 35,222 0 0 (35,222)

Amounts of non current assets written off on disposal or sale as part of the

gain/loss on disposal to the Comprehensive Income and Expenditure

Statement

129,298 0 0 (129,298)

Gain/loss on available for sale financial assets 0 0 0 0

Insertion of items not debited or credited to the Comprehensive Income and Expenditure Statement:

Statutory Provision for the Repayment of debt - Minimum Revenue Provision

(MRP)(6,111) 0 0 6,111

Other Adjustments

Adjustments involving the Capital Grants Unapplied Account:

Capital grants and contributions unapplied credited to the Comprehensive

Income and Expenditure Statement0 0 (88,460) 88,460

Application of grants to capital financing transferred to the Capital

Adjustment Account(86,288) 0 86,288 0

Adjustments involving the Capital Receipts Reserve:

Use of capital receipts reserve to finance new capital expenditure 0 0 0 0

Capital Receipts credited to Comprehensive Income & Expenditure

Statement(66,816) 59,068 0 7,748

Adjustments involving the Financial Instruments Adjustment Account:

Amount by which finance costs charged to the Comprehensive Income and

Expenditure Statement are different from finance costs chargeable in the

year in accordance with statutory requirements

4,159 0 0 (4,159)

Adjustments involving the Pensions Reserve:

Reversal of items relating to retirement benefits debited or credited to the

Comprehensive Income and Expenditure Statement58,106 0 0 (58,106)

Employer's pension contributions and direct payments to pensioners

payable in the year(31,013) 0 0 31,013

Adjustments involving the Collection Fund Adjustment Account:

Amount by which council tax income credited to the Comprehensive Income

and Expenditure Statement is different from council tax income calculated

for the year in accordance with statutory requirements

(1,027) 0 0 1,027

Adjustment involving the Unequal Pay Back Pay Adjustment Account:

Amount by which amounts charged for Equal Pay claims to the

Comprehensive Income and Expenditure are different from the cost of

settlements chargeable in the year in accordance with statutory

requirements

0 0 0 0

Reversal of previous capitalisation of Single Status costs 0 0 0 0

Adjustment involving the Accumulated Absences Account:

Amount by which officer remuneration charged to the Comprehensive

Income and Expenditure Statement on an accruals basis is different from

remuneration chargeable in the year in accordance with statutory

requirements

823 0 0 (823)

Total Adjustments 65,404 59,068 (2,172) (122,300)

79

28 Transfers to/from Earmarked Reserves

This note sets out the amounts set aside from the General Fund in earmarked reserves and the amounts posted back from earmarked reserves to meet General Fund expenditure in 2017-18.

Earmarked Reserves were increased to £19.9m in year, the majority of which are allocated for a specific purposes, such as the Public Health reserve which is ringfenced to ensure that it is only spent on improving Public Health outcomes within Northamptonshire. In 2018/19, a budget delivery reserve was created - This reserve will be used, if necessary, to deal with any further legacy issues and/or to support the Council’s ongoing financial sustainability

Schools Reserves

Opening

Balance

Apr 2018

Transfers to

Reserve

Transfers

from

Reserve

Closing

Balance

March 2019

£000 £000 £000 £000

Dedicated schools grant 423 (756) (334)

PFI Scheme 3,067 37 3,104

Schools balances reserves 18,141 19,267 (18,687) 18,722

Schools loan advances (540) 110 (430)

Schools Reserves 21,090 19,414 (19,443) 21,062

Opening

Balance

Apr 2018

AdjustmentTransfers to

Reserve

Transfers

from

Reserve

Closing

Balance

March

2019

£000 £000 £000 £000 £000

Insurance Reserve - 2,795 718 3,513

Budget Delivery Reserve - 9,262 9,262

LGSS Reserves 381 426 - 135 672

Redundancy Reserve - 975 - 975 -

Service Carry Forwards of Partnership Funding - 23 23

Asset disposal Reserve - 1,114 - 1,114 -

Business Rates Reserve - 1,782 - 1,782 -

Public Health Reserve 2,797 2,742 5,540

Other Earmarked Reserves 65 623 159 847

Earmarked Reserves 3,243 6,174 14,445 - 4,006 19,857

80

29 Capital Expenditure and Financing

The total amount of capital expenditure incurred in the year is shown in the table below (including the value of assets acquired under finance leases and PFI/PPP contracts), together with the resources that have been used to finance it. Where capital expenditure is to be financed in future years by charges to revenue as assets are used by the Council, the expenditure results in an increase in the Capital Financing Requirement (CFR), a measure of the capital expenditure incurred historically by the Council that has yet to be financed.

2017-18 2018-19

£'000 £'000

829,002 Opening Capital Financing requirement 875,071

Capital Investment

84,950 Property, Plant and Equipment 59,842

59,879 Revenue Expenditure Funded From Capital Under Statute 34,340

Sources of Finance

(91,585) Government grants and other contributions applied (70,539)

(7,175) Sums set aside from revenue (includes direct revenue financing, MRP and any voluntary set aside) (6,460)

875,071 Closing Capital Financing Requirement 892,254

Explanation of movements in year

45,919 Increase/(Decrease) in underlying need to borrow 17,183

150 Assets acquired under Finance Leases 0

0 Assets acquired under PFI/PPP contracts 0

46,069 Increase / (decrease) in Capital Financing Requirement 17,183

81

30 Insurance Account The Council is insured against risks through a combination of self insurance and insurance with other organisations. There is a total Insurance Fund of £9.734m to meet the estimated outstanding claims below the excesses of the Council's insurance policies.

Annual policy excesses are as follows:

Combined Liability (Public & Employers) £'000

Individual excess (per claim) 200

Annual aggregate (total excess for year across all claims)

4,150

Property

Individual excess educational properties 150

Individual excess other properties 250

Annual aggregate 510

The Council charges premiums, claims paid and management costs to the insurance account and then recharges these costs to services. The Council’s insurance brokers estimate the value of any outstanding claims and the Insurance Provision is adjusted accordingly. Details of Spending and Income are as follows:

2017-18 2018-19

£'000 £'000

Spending

1,539 External Premiums paid 1,500

36 Internal Premiums paid 50

270 Management costs 271

1,482 Claims paid 995

(38) Adjustment to provision (58)

3,289 2,758

Income

(3,289) Charges to schools and services (2,758)

0 Net (Income) / deficit 0

82

31 External Audit costs

2017-18

2018-19

£000 £000

0 Fees payable to EY LLP (external auditors) with regard to external audit services carried out for the year

106

138 Fees payable to KPMG LLP (external auditors) with regard to external audit services carried out for the year

400 Fees payable to KPMG LLP with regards to audit overruns for the 17/18 Audit*

40 Fees payable to KPMG LLP with regard to work completed over the Advisory notice and Best Value Inspection

10 Fees payable to KPMG LLP with regards to other work

588 106

* This is an estimated figure based on the expected costs to complete the audit.

32 Members’ Allowances The allowances paid to members of the Council were £0.74m (2017-18 £0.86m).

33 Officers’ Remuneration The numbers of employees whose remuneration, taxable expenses and severance pay (if applicable) was £50,000 or more during the year are detailed below. This includes pension strain costs – additional contributions payable when an employee retires before their normal retirement date. The table excludes the senior employees who are detailed separately on the following page.

Staff in

Schools

Other

staff

2017-18

TotalPay Band

Staff in

Schools

Other

staff

2018-19

Total

51 48 99 £50,000 - £54,999 43 45 88

47 22 69 £55,000 - £59,999 30 25 55

22 17 39 £60,000 - £64,99917 14 31

18 15 33 £65,000 - £69,999 13 15 28

9 10 19 £70,000 - £74,999 4 11 15

2 6 8 £75,000 - £79,999 4 4 8

1 2 3 £80,000 - £84,999 1 3 4

3 2 5 £85,000 - £89,999 3 5 8

2 5 7 £90,000 - £94,999 1 5 6

1 4 5 £95,000 - £99,999 0 5 5

0 2 2 £100,000 - £104,999 1 0 1

0 2 2 £105,000 - £109,999 0 0 0

0 0 0 £110,000 - £114999 0 1 1

0 2 2 £115,000 - £119,999 0 1 1

0 2 2 £120,000 - £124,999 0 0 0

0 1 1 £125,000 - £129,999 0 0 0

0 1 1 £130,000 - £134,999 0 0 0

0 1 1 £160,000 - £164,999 0 0 0

0 1 1 £260,000 - £264,999 0 0 0

156 143 299 Totals 117 134 251

Disclosure of remuneration for senior employees. Senior employees are typically a Council’s Chief Executive (or equivalent) and their direct reports (other than administration staff).

83

Post holder information

Year

No

tes

Sala

ry

All

ow

an

ce &

Fe

es (

inc

Ho

no

rari

a

& S

RO

pa

ym

en

ts)

Exp

en

ses A

llo

wan

ces

Co

mp

en

sati

on

fo

r L

os

s

of

Off

ice

Pay in

Lie

u o

f N

oti

ce

To

tal

Rem

un

era

tio

n

exclu

din

g

pe

nsio

n c

on

trib

uti

on

Pen

sio

n c

on

trib

uti

on

s

To

tal

Rem

un

era

tio

n

inc

lud

ing

pe

nsio

n c

on

trib

uti

on

£00

0 £000 £000 £000

£000

£000 £00

0 £000

Current post holders:

Chief Executive (Head of Paid Service) - T Grant 2018-19 1 133 0 10 0 0 143 22 165

2017-18 1 0 0 0 0 0 0 0 0

Executive Director of Finance (Section 151) 2018-19 2 57 4 0 0 0 62 0 62

2017-18 2 0 0 0 0 0 0 0 0

Group Counsel (Monitoring Officer) 2018-19 3 93 4 7 0 0 104 18 122

2017-18 3 87 5 0 0 0 92 14 106

Director of Public Health 2018-19 4 105 8 1 0 0 114 16 130

2017-18 4 75 1 1 0 0 77 11 88

Acting Executive Director of Commercial & Place 2018-19 5 101 17 0 0 0 118 22 141

2017-18 5 0 0 0 0 0 0 0 0

Executive Director Adults Community and Wellbeing (DASS)

2018-19 6 137 0 1 0 0 138 22 161

2017-18 6 138 0 1 0 0 139 22 161

Former post holders:

Executive Director Children, Families and Education (DCS)

2018-19 7 52 0 0 0 0 52 11 63

2017-18 7 0 0 0 0 0 0 0 0

Chief Fire Officer and Community Safety 2018-19 8 89 0 0 0 0 89 4 93

2017-18 8 116 0 0 0 0 116 25 141

Exec Director Children, Families and Education DCS 2018-19 9 51 0 0 0 0 51 7 58

2017-18 9 138 3 1 0 0 142 23 165

Exec Director Resources 2018-19 10 77 0 0 0 0 77 0 77

2017-18 10 49 0 0 0 0 49 0 49

Interim Chief Executive (Head of Paid Service) - A Quincey

2018-19 11 48 0 0 0 0 48 0 48

2017-18 11 61 12 0 0 0 73 0 73

Director of Public Health 2018-19 12 0 0 0 0 0 0 0 0

2017-18 12 75 1 1 0 0 77 11 88

Notes:

1 The Chief Executive post is a two year fixed term appointment, commencing on the 26 July 2018.

2 The Executive Director Finance started in post on 1 November 2018 on a two year fixed term appointment.

3 The General Counsel commenced on 04 May 2017.

4 The Director of Public Health commenced acting up in post from 29 June 2017 and was formalised in post in the December 2017.

5 The Acting Executive Director of Commercial & Place started acting up from 21 May 2018.

6 The Executive Director Adults Community and Wellbeing (DASS) was in post for the full year in 2017/18, but given DASS responsibilities from 12 September 2017.

84

7 The Director of Children Services commenced on 12 of July 2018.

8 The Chief Fire Officer left employment of the local authority on the 31 December 2018, as part of the transfer of Fire and Rescue Services to the NFRA.

9 The Executive Director Children, Families and Education (DCS) left on 31 December 2018

10 The Executive Director Resources commenced in post on the 4 December 2017 and left on the 4 October 2018

11 The Executive Director Commercial, Place and Public Health commenced in post on 23 October 2017. The postholder was appointed as Acting Chief Executive on 29 March 2018 until 27th July 2018.

12 The Director of Public Health left the Council on 30 June 2017.

13 The Director of Children Services post was filled by an interim from 12 of February 2019 to the end of the financial year at a cost of £36k

34 Termination Benefits

Exit package cost band (including special payments)

Number of compulsory

redundancies

Number of other departures agreed

Total number of exit packages by

cost band

Total cost of exit packages in each

band

2017-18 2018-19 2017-18 2018-19 2017-18 2018-19 2017-18 2018-19

£000 £000

£0 – £20,000 35 5 46 7 81 12 582 141

£20,001 - £40,000 1 3 12 5 13 8 345 225

£40,001 – £60,000 3 1 5 1 8 2 392 91

£60,001 – £80,000 0 0 2 2 2 2 139 0

£80,001 – £100,000 0 1 1 2 1 3 100 0

£100,001 – £150,000 0 0 3 0 3 0 384 0

£150,001 – £200,000 0 0 0 0 0 0 0 0

£200,001 – £250,000 0 0 1 0 1 0 244 0

£250,001 – £300,000 0 0 0 0 0 0 0 0

Total cost included in bandings 39 10 70 17 109 27 2,186 456

35 Transactions with Related Parties

The Council is required to disclose material transactions with related parties – bodies or individuals that have the potential to control or influence the Council or to be controlled or influenced by the Council. Disclosure of these transactions allows readers to assess the extent to which the Council might have been constrained in its ability to operate independently or might have secured the ability to limit another party’s ability to bargain freely with the Council.

Central Government has effective control over the general operations of the Council – it is responsible for providing the statutory framework within which the Council operates and provides the majority of its funding in the form of grants. Details of specific Government grants can be found in Note 10.

a) Members

Members of the Council have direct control over the Council’s financial and operating policies.

The total of members’ allowances paid in 2018-19 is shown in note 32.

During 2018-19 the Council bought goods and services and gave grants to the value of £0k (2017-18 £921k) to organisations or companies in which 0 members (2017-18 4 members) had an interest. The Council entered into contracts in line with standard procedures and made grants with proper consideration of declarations of interest.

85

b) Officers

During 2018-19 the Council bought goods and services to the value of £0k (2017-18 £426k) from companies in which officers had an interest

c) EMPSN Services Ltd (formally East Midlands Broadband Consortium)

EMPSN were established to provide broadband connectivity and online IT safety services to schools and academies in the East Midlands. Our services are provided through a catalogue of trusted suppliers, each of which have been through a stringent OJEU compliant procurement process.

EMPSN Services Ltd is supported through a membership scheme with each member paying a subscription of £5k.The Council is a member of the board and as such can influence decisions that impact on the running of the organisation. The company delivers broadband connectivity services predominantly to schools in the East Midlands.

d) Northamptonshire Local Government Pension Scheme

The Northamptonshire County Council Pension Fund is administered by Northamptonshire County Council. Consequently there is a strong relationship between the Council and the Fund.

The Council incurred costs of £1.8m (2017-18: £1.9m) in relation to the administration of the Fund and was subsequently reimbursed by the Fund for these expenses.

The Council is also the single largest employer of members of the Pension Fund and contributed £25.9m of employer’s contributions to the Fund in 2018-19 (2017-18: £20.7m).

e) Local Clinical Commissioning Groups (CCG)

Details of the pooled budgets with local Clinical Commissioning Groups (CCGs) are shown in Note 8.

f) LGSS

LGSS is the shared services arrangement set up by founding partners Cambridgeshire County Council (CCC) and Northamptonshire County Council (NCC), offering a full range of support service. From 1 April 2016, Milton Keynes Council (MKC) became a full partner of LGSS.

It seeks to reduce the cost of business services through the consolidation of resources, process redesign and exploitation of technology.

g) LGSS Law Ltd

LGSS Law Ltd was spun off from the existing LGSS shared service venture, operating as a private limited company to take advantage of the Alternative Business Structure status that allows non-lawyers to own legal practices. Ownership is split equally between Cambridgeshire County Council (CCC), Northamptonshire County Council (NCC) and Central Bedfordshire Council, with each Council owning 50 shares each.

During 2018-19 the Council made payments of £10.6m (2017-18 £10.2m) to LGSS Law Ltd as payment for legal services received in the year. At March 2019 there was a net debtor balance of £1.7m (2017-18: £1.9m).

The Council has considered that group accounts will not be required for LGSS Law Ltd, as the net worth of LGSS Law Ltd and exposure to risk is not material. Users of the Council accounts will be able to see the complete activities of the Council and its exposure to risk without producing group accounts.

h) First for Wellbeing CIC

First for Wellbeing is a Community Interest Company (CIC) that became operational on 1 April 2016. A CIC is a form of social enterprise set up specifically to serve the needs of the local community. However, at the Northamptonshire County Council Cabinet meeting on 13 March 2018 a decision was made to effectively dissolve First for Wellbeing CIC by the return of the delivery of wellbeing and preventative services, back to the Council. The Company’s last trading day was 1 September 2018.

First for Wellbeing CIC is consolidated into the Council’s group accounts up 1 September 2018.

86

During this period the Council made payments of £6.0m (2017-18 £25.3m) to First for Wellbeing CIC and received payments of £122k (2017-18 £1m) from First for Wellbeing CIC.

i) Northamptonshire Trading Limited and Olympus Care Service Limited

The Council has a controlling interest in two companies, Northamptonshire Trading Limited and Olympus Care Services Limited, which are incorporated in the group accounts. These companies both commenced trading on 1 April 2012. The Council owns 100% of the share capital of Northamptonshire Trading Limited. Northamptonshire Trading Limited owns 100% of the share capital of Olympus Care Services Limited, and this gives the Council effective control of Olympus Care Services Limited.

During 2018-19 the Council made payments of £662k to Northamptonshire Trading Limited (2017-18 £30.8m). During 2018-19 the Council received payments of £50k from Northamptonshire Trading Limited (2017-18 £3m). At 31 March 2019 there was a net creditor balance of £3k with Northamptonshire Trading Limited. (2017-18: net creitor balance of £39k).

During 2018-19 the Council made payments of £477k to Olympus Care Services Limited (2017-18: £114k). During 2018-19 the Council received payments of £120k from Olympus Care Services Limited (2017-18: 275k). At 31 March 2019 there was a creditor balance of £1k (2017-18: £0k) with Olympus Care Services Limited.

j) Opus LGSS

Opus LGSS People solution is a joint venture owned by Opus and the LGSS Partner organisations, with Northamptonshire County Council having a 16% share. Opus LGSS recruits temporary and interim workers, allowing the Council to reduce agency costs for its temporary staffing needs as well as have greater influence over the quality and pay of agency workers. During 2017-18 the Council made payments of £11.4m to Opus LGSS and a net creditor balance of £585k. At 31 March 2019 there was a creditor balance of £302k with Opus LGSS.

k) Northamptonshire Corporate Parenting Ltd

Northamptonshire Corporate Parenting Ltd has was set up in 2017-18 to provide non -statutory support to Northamptonshire’s Children in Care and Care Leavers. It is wholly owned by Northamptonshire County Council .There were no significant transactions with Northamptonshire County Council in 2018-19 and none in 2017-18.

l) Northamptonshire Sport

One of 43 Active Partnerships across England, Northamptonshire Sport is partnership of local and national organisations Working together to get people in Northamptonshire More Active, More Often. The Northamptonshire Sport Core Team is hosted by Northamptonshire County Council and its activities are funded through Sport England Lottery grant and by local and national partners. The Income and Expenditure report for Northamptonshire Sport is outlined below

87

m) Debtors and Creditors balances

Apart from the above there were no significant balances due to or from related parties at 31 March 2019.

36 Pension schemes accounted for as defined contribution schemes

a) Teachers

In 2018-19 £9.9m was paid to the Teachers Pensions Agency for teachers’ pension costs, which represents 16.48% of teachers’ pensionable pay for the period.

b) Public Health

Public Health staff transferred from the NHS to Northamptonshire County Council on 1 April 2013. These staff have maintained their membership of the NHS Pension Scheme. In 2018-19 the payments made into the NHS Pension Scheme totalled £297k, 14.38% of pensionable pay.

37 Retirement Benefits – IAS19 Disclosures for defined benefit pension schemes

a) Participation in Pension Schemes

The Local Government Pension Scheme and Fire Fighters’ Pension Scheme are defined benefit schemes.

As part of the terms and conditions of employment of its officers and other employees, the Council offers retirement benefits. Although these benefits will not actually be payable until employees retire, the Council has a commitment to make the payments that need to be disclosed at the time that employees earn their future entitlement.

The Council participates in two pension schemes that are subject to the requirements of IAS19:

The Local Government Pension Scheme for civilian employees, administered by Northamptonshire County Council – this is a funded scheme, meaning that the Council and employees pay contributions into a fund, calculated at a level intended to balance the pension liabilities with investment assets.

Northamptonshire Sport Actual Actual

Income & Expenditure Report 2017/18 2018/19

£'000 £'000Income

Commercial Activity (567,073) (590,908)

Sport England Grant (435,490) (296,112)

Other Local Authority Contributions (153,018) (83,018)

Other Funding Contributions (393,494) (308,081)

Total Income (1,549,075) (1,278,120)

Expenditure

Staff Costs 1,139,664 953,843

Transport & Travel 22,518 20,475

Supplies & Services 357,334 279,893

Third party Payments 27,445 29,955

Total Expenditure 1,546,961 1,284,166

Income Less Expenditure (2,114) 6,046

88

The Fire Fighters Pension Scheme – this is an unfunded scheme, meaning that there are no investment assets built up to meet actual pensions payments as they eventually fall due. Three pension schemes operate within the Fund, the 1992 scheme, the 2006 scheme and the 2015 scheme.

b) Reconciliation of present value of the scheme liabilities (defined benefit obligation)

Local Government Fire Fighters Total

Pension Scheme Pension Scheme

March

2018 March

2019 March

2018 March

2019 March

2018 March

2019 £000 £000 £000 £000 £000 £000

Opening Defined Benefit Obligation

1,499,899 1,518,260 272,530 0 1,772,429

1,518,260

Current Service Cost 49,867 45,126 4,680 0 54,547

45,126

Interest Cost 38,985 41,338 7,200 0 46,185

41,338

Contribution by Scheme Participants

7,354 7,253 1,200 0 8,554

7,253

Actuarial Gains and Losses:

Arising from changes in financial assumptions

(28,758) 127,059 0 0 (28,758)

127,059

Other (153) 347 (1,580) 0 (1,733)

347

Curtailments, Settlements and past Service Costs

(9,499)

(10,316)

170 0 (9,329)

(10,316)

Liability assumed on entity Combinations

0 24,660 0 0 0

24,660

Benefits paid (39,435) (40,968) (8,060) 0 (47,495)

(40,968)

Closing Defined Benefit Obligation

1,518,260 1,712,759 276,141 0 1,794,401

1,712,759

The liabilities show the underlying commitments that the Council has in the long run to pay post employment (retirement) benefits. The total liability of £1,713m has a substantial impact on the net worth of the Council as recorded in the Balance Sheet. However, statutory arrangements for funding the deficit mean that the financial position of the Council remains healthy:

The deficit on the local government scheme will be made good by increased contributions over the remaining working life of employees (i.e. before payments fall due), as assessed by the scheme actuary.

Finance is only required to be raised to cover discretionary benefits when the pensions are actually paid.

The Fire Fighters pension scheme was transferred to the Northampton Fire and Rescue Service on the 1 of January 2019.

89

c) Pensions Assets and Liabilities Recognised in the Balance Sheet

Local Government Pension Scheme

Fire Fighters Pension Scheme

Total

2017-18 2018-19 2017-18 2018-19 2017-18 2018-19

£000 £000 £00

0 £000

£000 £000

Present value of the defined benefit obligation

(1,518,260) (1,712,759) (276,141) 0

(1,794,401)

(1,712,759)

Fair value of plan assets

1,046,942 1,129,322 0 0 1,046,942 1,129,322

Net Liability arising from defined benefit obligation

(471,318) (583,437)

(276,141)

0

(747,459)

(583,437)

d) Reconciliation of the Movements in the Fair Value of the Scheme (Plan) Assets

Pension Scheme

March 2018 March 2019

£000 £000

Opening Fair Value of Employer Assets 1,031,899 1,046,942 Return on Plan Assets, excluding the amount included in the net interest costs

(5,107) 48,675

Interest income on Plan assets 26,693 28,359

Changes in foreign exchange rates (3,662) (8,845)

Contributions from Employer 29,200 31,012

Contributions by scheme participants 7,354 7,253

Benefits Paid (39,435) (40,968)

Effects of business combinations and disposals 0 16,894

Closing Fair Value of Employer Assets 1,046,942 1,129,322

e) Comprehensive Income and Expenditure Statement & Movement in Reserve Statement

The Council recognises the cost of retirement benefits in the reported cost of services when they are earned by employees, rather than when the benefits are eventually paid as pensions. However, the charge required to be made against Council Tax is based on the cash payable in the year, so the real cost of post employment and retirement benefits are reversed out of the General Fund via the Movement in Reserves Statement. The following transactions have been made in the Comprehensive Income and Expenditure Statement and the General Fund Balance via the Movement in Reserves Statement during the year.

The cumulative amount of actuarial gains and losses recognised in the Comprehensive Income and Expenditure Statement to 31 March 2019 is a loss of £85,026k, this loss relates only to the Local Government Pension Scheme as the Fire Fighters Pension Scheme was transferred to its own scheme in January 2019.

90

2017-18 2018-19 2017-18 2018-19 2017-18 2018-19

£'000 £'000 £'000 £'000 £'000 £'000

Ref. No to

tie back to

Actuary

Report 18-19Cost of

Services

3 49,867 45,126 4,680 0 54,547 45,126

3 (5,837) (1,471) 1,370 0 (4,467) (1,471)

Net Interest

Expense3 12,292 12,979 7,200 0 19,492 12,979

56,322 56,634 13,250 0 69,572 56,634

5,107 (48,675) 0 0 5,107 (48,675)

(28,758) 127,059 0 0 (28,758) 127,059

(153) 347 (1,580) (1,733) 347

(23,804) 78,731 (1,580) 0 (25,384) 78,731

(27,122) (25,622) (5,190) 0 (32,312) (25,622)

-

29,200 31,012 8,060 0 37,260 31,012

Local Government

Pension Scheme

Fire Fighters Pension

Scheme Total

Income and Expenditure Account

Financing and Investment Income

and Expenditure

Current Service Cost

Past Service Cost (including

Settlements and Curtailments)

Movement in Reserves Statement

Actual amount charged against the

General Fund Balance for pensions

in the year:

Reversal of net charges made for

retirement benefits in accordance with

IAS19

Employers' contribution payable to

scheme (LGPS)/Retirement Benefits

payable to pensioners (FPS)

Other

Total defined benefit cost

recognised in Income and

Expenditure Account

Return on plan assets (excluding the

amount included in the net interest

expense)

Actuarial gains and losses arising on

changes in financial assumptions

Total remeasurements recognised

in Other Comprehensive Income

(OCI)

91

f) The major categories of plan assets as a percentage of total plan assets

The Firefighters’ Pension Scheme has no assets to cover its liabilities. The fund balances to nil each year through the receipt or refund of a top up grant from the Central Government Sponsoring body.

The Local Government Pension Scheme’s assets consist of the following categories, by proportion of the total assets held:

Local Government Fire Fighters


2017-18 2018-19 2017-18 2018-19

% % % %

Equities 81 80 N/A N/A Bonds 8 9 N/A N/A Property 8 8 N/A N/A Cash 3 3 N/A N/A

Liabilities have been assessed on an actuarial basis using the projected unit method, an estimate of the pensions that will be payable in future years dependent on assumptions includes mortality rates and salary levels. The Fire Fighters Pension Scheme and the Local Government Pension Scheme liabilities have been assessed by the Government Actuary’s Department (GAD) and Hymans Robertson LLP respectively. The financial assumptions used for the Local Government Pension Scheme were those from the beginning of the year and have not been changed during the year.

The principal assumptions used by the actuary are outlined in the tables below:

g) The main assumptions used in their calculations have been:

Local Government Fire Fighters


March March March March

2017-18 2018-19 2017-18 2018-19

% % % %

Rate of inflation (CPI) 2.5 2.5 2.30 N/A

Rate of increase in salaries 2.7 2.8 4.30 N/A

Rate of increase in pensions 2.4 2.5 2.30 N/A

Rate for discounting scheme liabilities

2.7 2.4 2.55 N/A

Take up of option to convert annual pre April 2008 service

50 50 N/A N/A

Take up of option to convert annual post April 2008 service pension into retirement grant

75 75 N/A N/A

92

h) Mortality Assumptions

For the County Council and Fire Fighter’s Pension Funds the average future life expectancies at age 65 are summarised below.

Local Government Fire Fighters Pension Scheme Pension Scheme

2017-18 2018-19 2017-18 2018-19 Years Years Years Years

65 year old current pensioner

Male 22.1 22.1 21.9 N/A

Female 24.2 24.2 21.9 N/A

45 year old future pensioner at age 65

Male 23.9 23.9 23.9 N/A

Female 26.1 26.1 23.9 N/A

i) Local Government Pension Scheme Assets Comprised

2017-18 2018-19

£000000 £000

Cash and Cash Equivalents 28,028 26,502

Equity Securities

Consumer 74,796 123,887

Manufacturing 3,513 43,445

Energy and Utilities 59,396 64,435

Financial Institutions 72,530 70,293

Health and Care 29,480 44,288

Information Technology 74,077 60,641

Other 66,887 0

Debt Securities Bonds

Government 87,735 96,636

Property

UK 79,187 89,298

Overseas 3,764 2,829

Private Equity

All 5,619 20,373

Investment Funds and Trust Units

Equities 384,974 399,718

Bonds 76,956 81,962

Infrastructure

0 5,015

Total Assets 1,046,942 1,129,322

93

j) Impact on the Defined Benefit Obligation in the Scheme:

0.5% decrease in Real Discount rate 10% 174,841

0.5% increase in Salary increase rate 1% 16,419

0.5% increase in Pension increase rate 9% 157,160

Increase/Decrease in assumption

Approx % increase to

Defined Benefit

Obligation

Approx Monetary

Value ((£’000)

95

Appendices

96

1 Accounting Concepts and Policies

1.1 General Principles

The Statement of Accounts summarises the Council’s financial transactions for the 2018-19 financial year and its position at the year end of 31 March 2019.

The Council is required to prepare an annual Statement of Accounts by the Accounts and Audit Regulations 2015. These regulations require the Statement of Accounts to be prepared in accordance with proper accounting practices. These practices primarily comprise the Code of Practice on Local Authority Accounting in the United Kingdom 2018-19, supported by International Financial Reporting Standards (IFRS) and statutory guidance issued under section 12 of the 2003 Act.

As local authorities need to reflect statutory conditions, accounting standards are amended for specific statutory adjustments so that the Council’s accounts present a true and fair view of the financial position and transactions of the authority. All accounting policies are disclosed where they are material.

The accounting convention adopted in the Statement of Accounts is principally historical cost, modified by the revaluation of certain categories of non-current assets and financial instruments.

1.2 Qualitative Characteristics of Financial Statements

1.2.1 Relevance

The accounts have been prepared with the objective of providing information about the Council’s financial performance and position that is useful for assessing the stewardship of public funds and for making financial decisions.

1.2.2 Reliability

The financial information is reliable as it has been prepared so as to reflect the reality or substance of the transaction, is free from deliberate or systematic bias, is free from material error and has been prudently prepared.

1.2.3 Comparability

In addition to complying with the Code, the accounts also comply with the Service Reporting Code of Practice (SeRCOP). This code establishes proper practice in relation to consistent financial reporting below statement of accounts level and aids comparability with other local authorities.

1.2.4 Understandability

These accounts are based on accounting concepts and terminology which require reasonable knowledge of accounting and local government. Every effort has been made to use plain language and where technical terms are unavoidable they have been explained in the glossary contained within the accounts.

1.2.5 Materiality

The concept of materiality has been utilised in preparing the accounts so that insignificant items and fluctuations under an acceptable level of tolerance are permitted, provided that in aggregate they would not affect the interpretation of the accounts.

97

1.3 Underlying Assumptions

1.3.1 Accrual Basis

The financial statements, other than the cash flow, are prepared on an accrual basis. Income and expenditure is recognised in the accounts in the period in which it is earned or incurred, not as cash is received or paid. In particular:

Revenue from the sale of goods is recognised when the Council transfers the significant risks and rewards of ownership to the purchaser and it is probable that economic benefits or service potential associated with the transaction will flow to the Council.

Revenue from the provision of services is recognised when the Council can measure reliably the percentage of completion of the transaction and it is probable that economic benefits or service potential associated with the transaction will flow to the Council.

Supplies are recorded as expenditure when they are consumed – where there is a gap between the date supplies are received and their consumption; they are carried as inventories on the Balance Sheet.

Expenses in relation to services received (including services provided by employees) are recorded as expenditure when the services are received rather than when payments are made.

Interest receivable on investments and payable on borrowings is accounted for respectively as income and expenditure on the basis of the effective interest rate for the relevant financial instrument rather than the cash flows fixed or determined by the contract.

Where revenue and expenditure have been recognised but cash has not been received or paid, a debtor or creditor for the relevant amount is recorded in the Balance Sheet. Where debts may not be settled, the balance of debtors is written down and a charge made to revenue for the income that might not be collected.

1.3.2 Going Concern

The accounts have been prepared on the assumption that the Council will continue in existence until March 2021 and thereafter its rights and obligations will transfer to the two unitary authorites due to be created from the 1 April 2021.

1.4 Accounting Policies

1.4.1 Acquired operations

When necessary, income and expenditure directly related to other acquired operations will be shown separately within the Comprehensive Income and Expenditure Statement under the heading of acquired operations.

1.4.2 Cash and Cash Equivalents

Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours and investments whose maturity date is three months or less from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.

98

In the Cash Flow Statement, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and form an integral part of the Council’s cash management.

1.4.3 Exceptional Items

When items of income and expense are material, their nature and amount is disclosed separately, either on the face of the Comprehensive Income and Expenditure Statement or in the notes to the accounts, depending on how significant the items are to an understanding of the Council’s financial performance.

1.4.4 Contingent Liabilities

A contingent liability arises where an event has taken place that gives the Council a possible obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Council. Contingent liabilities also arise in circumstances where a provision would otherwise be made but either it is not probable that an outflow of resources will be required or the amount of the obligation cannot be measured reliably.

Contingent liabilities are not recognised in the Balance Sheet but disclosed in a note to the accounts.

1.4.5 Contingent Assets

A contingent asset arises where an event has taken place that gives the Council a possible asset whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Council.

Contingent assets are not recognised in the Balance Sheet but disclosed in a note to the accounts where it is probable that there will be an inflow of economic benefits or service potential.

1.4.6 Prior Period Adjustments, Changes in Accounting Policies and Estimates and Errors

Prior period adjustments may arise as a result of a change in accounting policies or to correct a material error. Changes in accounting estimates are accounted for prospectively, i.e. in the current and future years affected by the change and do not give rise to a prior period adjustment.

Changes in accounting policies are only made when required by proper accounting practices or the change provides more reliable or relevant information about the effect of transactions, other events and conditions on the Council’s financial position or financial performance.

Where a change is made, it is applied retrospectively (unless stated otherwise) by adjusting opening balances and comparative amounts for the prior period as if the new policy had always been applied.

Where items of income and expenditure are material, their nature and amount is disclosed separately either on the face of the Comprehensive Income and Expenditure Statement or in the notes to the accounts, depending on how significant the items are to an understanding of the Councils financial Performance.

1.4.7 Provisions

Provisions are made where an event has taken place that gives the Council a legal or constructive obligation that probably requires settlement by a transfer of economic benefits or service potential and a reliable estimate can be made of the amount of the obligation.

99

Provisions are charged as an expense to the appropriate service line in the Comprehensive Income and Expenditure Statement in the year that the Council becomes aware of the obligation, and are measured at the best estimate at the balance sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties.

When payments are eventually made, they are charged to the provision carried in the Balance Sheet. Estimated settlements are reviewed at the end of each financial year – where it becomes less than probable that a transfer of economic benefits will now be required (or a lower settlement than anticipated is made), the provision is reversed and credited back to the relevant service.

Where some or all of the payment required to settle a provision is expected to be recovered from another party (e.g. from an insurance claim), this is only recognised as income for the relevant service if it is virtually certain that reimbursement will be received if the Council settles the obligation.

1.4.8 Reserves

The Council sets aside specific amounts as reserves for future policy purposes or to protect against unexpected events. When expenditure to be financed from a reserve is incurred, it is charged to the appropriate service revenue account in that year, to be recorded against the Net Cost of Services in the Comprehensive Income and Expenditure Account. The reserve is then appropriated back into the General Fund Balance in the Movement in Reserves Statement so that there is no net charge against Council tax for the expenditure.

County Council Reserves include:

Earmarked reserves, which are set aside for specific purposes;

General reserves, which are set aside for unexpected events and cash flow management;

Revaluation Reserve, which records unrealised gains arising (since 1 April 2007) from holding fixed assets;

Capital Adjustment Account, which provides a balancing mechanism between the different rates at which assets are depreciated.

Certain reserves are kept to manage the accounting processes for non-current assets, financial instruments and retirement and employee benefits, and do not represent usable resources for the Council – these reserves are explained in the relevant policies.

1.4.9 Government Grants and Contributions

Whether paid on account, in arrears or by instalments, Government grants and other contributions are accounted for on an accruals basis and recognised as income when there is reasonable assurance that:

The Council will comply with the conditions attached to the payments, and

The grants or contributions will be received.

1.4.10 Revenue Grants and Contributions:

Revenue grants and contributions are matched in the Comprehensive Income and Expenditure Statement to the service expenditure to which they relate. Revenue grants received in advance of entitlement or meeting of conditions are treated as creditors (receipt in advance) until such time as they can be justifiably recognised as income and credited to the Comprehensive Income and Expenditure Statement. Grants to cover general expenditure, such as the Revenue Support Grant, are

100

credited to the Comprehensive Income and Expenditure Statement after Net Cost of Services. For the Public Health ringfenced grant from Department of Health the treatment in line with 1.4.8 (Reserves) will be that the unspent grant will be transferred to an earmarked reserve, with the funding to be utilised in line with grant conditions.

1.4.11 Capital Grants and Contributions:

Capital grants or contributions and donated assets are to be accounted for through the Comprehensive Income and Expenditure Statement once any conditions have been met and the expenditure has been incurred. The grant or contribution is then transferred from the General Fund to the Capital Adjustment Account (CAA), reflecting the application of capital resources to finance expenditure. The transfer is reported in the Movement in Reserves Statement.

Where a capital grant or contribution is received and conditions remain outstanding at the balance sheet date, the grant or contribution is to be recognised in Capital Grants Receipts in Advance. Once conditions are met, the grant or contribution will be transferred from the Capital Grants Receipts in Advance and recognised in the Comprehensive Income and Expenditure Statement.

Where a capital grant or contribution is received and there are no conditions, but the expenditure has not been incurred at the balance sheet date, the grant or contribution shall be recognised in the Comprehensive Income and Expenditure Statement and then transferred to the Capital Grants Unapplied account, reflecting its status as a capital resource available to finance expenditure. When the expenditure to be financed from the grant or contribution is incurred, the grant or contribution shall be transferred from the Capital Grants Unapplied account to the Capital Adjustment Account.

1.4.12 Employment Benefits

I Benefits payable during employment

Short term employee benefits are those due to be settled within 12 months of the year end. They include such benefits as wages and salaries, paid annual leave and paid sick leave, bonuses and non-monetary benefits (e.g. cars) for current employees and are recognised as an expense for services in the year in which employees render service to the Council. An accrual is made for the cost of holiday entitlements (or any form of leave e.g. time off in lieu) earned by employees but not taken before the year end which employees can carry forward into the next financial year. The accrual is made at the wage and salary rates applicable in the following accounting year, being the period in which the employee takes the benefit. The accrual is charged to Surplus or Deficit on the Provision of Services, but then reversed out through the Movement in Reserves Statement so that holiday benefits are charged to revenue in the financial year in which the holiday absence occurs.

II Termination Benefits

Termination benefits are amounts payable as a result of a decision by the Council to terminate an officer’s employment before the normal retirement date or an officer’s decision to accept voluntary redundancy and are charged on an accruals basis to the relevant service line (or in discontinued operations) in the Comprehensive Income and Expenditure Statement when the Council is demonstrably committed to the termination of the employment of an officer or group of officers or making an offer to encourage voluntary redundancy. Where termination benefits involve the enhancement of pensions, statutory provisions require the General Fund balance to be charged with the amount payable by the Council to the Pension Fund or pensioner in the year, not the amount calculated

101

according to the relevant accounting standards. In the Movement in Reserves Statement, appropriations are required to and from the Pensions Reserve to remove the notional debits and credits for pension enhancement termination benefits and replace them with debits for the cash paid to the Pension Fund and pensioners and any such amounts payable but unpaid at the year end.

III Post Employment Benefits

Northamptonshire County Council participates in three different pension schemes that meet the needs of employees in particular services. All the schemes provide members with defined benefits related to pay and service. The schemes are as follows:

a. Teachers

This is an unfunded scheme, administered by Capita Teachers’ Pensions on behalf of the Department for Education. In an unfunded defined benefit scheme, no assets are set aside and the benefits are paid for by the employer or other pension sponsor as and when they are paid. It is classified as a ‘single-employer defined benefit scheme’ in which the assets and liabilities are not identifiable at individual employer level on a consistent and reasonable basis. However, the individual employer has to pay for the unfunded discretionary benefits awarded. The pension cost shown in these accounts is:

The contribution rate set by the DCSF paid to a notional fund; plus the cost of paying early retirement pensions (excluding ill health) after September 1997.

b. Uniformed Firefighters

Two pension schemes exist for uniformed firefighters. The 1992 scheme for whole-time uniformed staff who were eligible to join pre April 2006 and the 2006 scheme, for whole-time staff joining after 1 April 2006 and retained firefighters who were previously not eligible to join a firefighter pension scheme. Both schemes were transferred to the Northampton Fire and Rescue Authority as at 01.01.2019 and is not included in these accounts for 2018-19.

c. The Local Government Pension Scheme

The Local Government Pension Scheme is accounted for as a defined benefits scheme.

The liabilities of the Pension Fund attributable to the Council are included in the Balance Sheet on an actuarial basis using the projected unit method i.e. an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates, employee turnover rates, and projections of projected earnings for current employees.

The assets of the Pension Fund attributable to the Council are included in the Balance Sheet at their fair value:

Quoted securities – current bid price.

Unquoted securities – professional estimate.

Unitised securities – current bid price.

Property – market value.

The change in the net pension’s liability is analysed into service cost and remeasurement components.

102

The service cost element comprises:

Current service cost – the increase in liabilities as a result of years of service earned this year – allocated in the Comprehensive Income and Expenditure Statement to the services for which the employees worked.

Past service cost – the increase in liabilities arising from current year decisions whose effect relates to years of service earned in earlier years – debited to the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement as part of Non -Distributed Costs.

Net interest on the net defined benefit liability (i.e. the net interest expense for the authority) – the change during the period in the net defined benefit liability (asset) that arises from the passage of time charged to the Financing and Investment Income and Expenditure line of the Comprehensive Income and Expenditure Statement. This is calculated by applying the discount rate used to measure the defined benefit liability at the beginning of the period, taking into account any changes in the net defined benefit liability during the period as a result of contribution and benefit payments.

Remeasurements comprise:

The return on plan assets – excluding amounts included in the net interest on the net defined benefit liability. These are charged to the Pensions Reserve as Other Comprehensive Income and Expenditure; and

Actuarial gains and losses – changes in the net pensions liability that arise because events have not coincided with assumptions made at the last actuarial valuation or because the actuaries have updated their assumptions. These are charged to the Pensions Reserve as Other Comprehensive Income and Expenditure.

Contributions paid to the LGPS Pension Fund – cash paid as employer’s contributions to the Pension Fund in settlement of liabilities; not accounted for as an expense.

In relation to retirement benefits, statutory provisions require the General Fund balance to be charged with the amount payable by the Council to the Pension Fund or directly to pensioners in the year, not the amount calculated according to the relevant accounting standards.

In the Movement in Reserves Statement, this means that there are appropriations to and from the Pensions Reserve to remove the notional debits and credits for retirement benefits and replace them with debits for the cash paid to the Pension Fund and pensioners and any such amounts payable but unpaid at the year end. The negative balance that arises on the Pensions Reserve thereby measures the beneficial impact to the General Fund of being required to account for retirement benefits on the basis of cash flows rather than as benefits are earned by employees.

1.4.13 Discretionary Benefits

The Council also has restricted powers to make discretionary awards of retirement benefits in the event of early retirements. Any liabilities estimated to arise as a result of an award to any member of staff (including teachers) are accrued in the year of the decision to make the award and accounted for using the same policies as are applied to the Local Government Pension Scheme.

103

1.4.14 Value Added Tax (VAT)

The Comprehensive Income and Expenditure Statement excludes any amounts related to VAT, as all VAT collected is payable to HM Revenue & Customs and all VAT paid is recoverable from them.

1.4.15 Overheads and Support Services

The costs of overheads and support services are charged to service segments in accordance with the authority’s arrangements for accountability and financial performance.

1.4.16 Intangible assets

Expenditure on non-monetary assets that do not have physical substance but are controlled by the Council as a result of past events (e.g. software licences) is capitalised when it is expected that future economic benefits or service potential will flow from the intangible asset to the Council.

Internally generated assets are capitalised where it is demonstrable that the project is technically feasible and is intended to be completed (with adequate resources being available) and the Council will be able to generate future economic benefits or deliver service potential by being able to sell or use the asset. Expenditure is capitalised where it can be measured reliably as attributable to the asset and is restricted to that incurred during the development phase.

Expenditure on the development of websites is not capitalised if the website is solely or primarily intended to promote or advertise the Council’s goods or services. Intangible assets are measured initially at cost. Amounts are only revalued where the fair value of the assets held by the Council can be determined by reference to an active market. In practice, no intangible asset held by the Council meets this criterion, and they are therefore carried at amortised cost. The depreciable amount of an intangible asset is amortised over its useful life to the relevant service line(s) in the Comprehensive Income and Expenditure Statement. An asset is tested for impairment whenever there is an indication that the asset might be impaired – any losses recognised are posted to the relevant service line(s) in the Comprehensive Income and Expenditure Statement. Any gain or loss arising on the disposal or abandonment of an intangible asset is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement.

Where expenditure on intangible assets qualifies as capital expenditure for statutory purposes, amortisation, impairment losses and disposal gains and losses are not permitted to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account and (for any sale proceeds greater than £10,000) the Capital Receipts Reserve.

The Council’s Intangible Assets consist of purchased software licences and any directly attributable costs of preparing the software for its intended use. The useful economic life of recognised intangible assets is at least three years. All Intangible Assets are included at historic cost and written down on a straight line basis over their economic lives from the year following acquisition. The useful economic lives are reviewed at the end of each reporting period and revised if necessary.

1.4.17 Property, Plant and Equipment

Assets that have physical substance and are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes and that are expected to be used during more than one financial year are classified as Property, Plant and Equipment.

104

I Measurement

Assets are initially measured at cost, comprising:

The purchase price;

Any costs attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management;

The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

The Council has adopted a policy of capitalising borrowing costs incurred whilst assets are under construction.

The cost of assets acquired other than by purchase is deemed to be its fair value, unless the acquisition does not have commercial substance (i.e. it will not lead to a variation in the cash flows of the Council). In the latter case, where an asset is acquired via an exchange, the cost of the acquisition is the carrying amount of the asset given up by the Council.

II Recognition

Expenditure on the acquisition, creation or enhancement of Property, Plant and Equipment with a value over £10,000 is capitalised, on an accruals basis. Provided that it is probable that the future economic benefits or service potential associated with the item will flow to the Council and the cost of the item can be measured reliably, provided it yields benefits to the Council and the services that it provides exceed one financial year. This applies to either single items over £10,000 or to groups of similar items whose value collectively exceeds £10,000. Expenditure that maintains but does not add to an asset’s potential to deliver future economic benefits or service potential (i.e., repairs and maintenance) is charged as an expense when it is incurred.

Assets are recorded in the Balance Sheet using the following measurement bases:

Land and buildings, vehicles, plant and equipment, furniture and equipment- lower of net current replacement cost or net realisable value in existing use.

Infrastructure assets (i.e. roads, roundabouts and bridges) – depreciated historical cost.

Community assets – depreciated historical cost.

Where there is no market-based evidence of fair value because of the specialist nature of an asset, depreciated replacement cost (DRC) is used as an estimate of fair value.

Where non-property assets that have short useful lives or low values (or both), depreciated historical cost basis is used as a proxy for fair value.

Assets included in the Balance Sheet at fair value are revalued sufficiently regularly to ensure that their carrying amount is not materially different from their fair value at the year end, but as a minimum every five years. Increases in valuations are matched by credits to the Revaluation Reserve to recognise unrealised gains. (Exceptionally, gains might be credited to the Comprehensive Income and Expenditure Statement where they arise from the reversal of a loss previously charged to a service).

Where decreases in value are identified, they are accounted for by:

105

Where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains);

Where there is no balance in the Revaluation Reserve or an insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Comprehensive Income and Expenditure Statement;

The Revaluation Reserve contains revaluation gains recognised since 1 April 2007 only, the date of its formal implementation. Gains arising before that date have been consolidated into the Capital Adjustment Account.

III Impairment

Assets are assessed at each year end as to whether there is any indication that an asset may be impaired. Where indications exist and any possible differences are estimated to be material, the recoverable amount of the asset is estimated and, where this is less than the carrying amount of the asset, an impairment loss is recognised for the shortfall.

Where impairment losses are identified, they are accounted for by:

Where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains);

Where there is no balance in the Revaluation Reserve or an insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Comprehensive Income and Expenditure Statement.

Where an impairment loss is reversed subsequently, the reversal is credited to the relevant service line(s) in the Comprehensive Income and Expenditure Statement, up to the amount of the original loss, adjusted for depreciation that would have been charged if the loss had not been recognised.

Expenditure and income relating to capital projects is accounted for on an accruals basis.

IV Depreciation

Depreciation is provided for on all assets with a determinable finite life (except for land, investment properties and heritage assets), by allocating the value of the asset in the Balance Sheet over the periods expected to benefit from their use. We do not provide reductions in value for new assets in their first year or for assets being made or built until they are brought into use.

Depreciation is calculated on a straight line basis over the length of useful life:

Category Useful Life in Years

IT Equipment 3

Infrastructure 40

Buildings 1 to 60

Vehicles - Cars 5

- Vans and Lorries 7

- Buses 10

- Fire Appliances 13

Revaluation gains are also depreciated, with an amount equal to the difference between current value depreciation charged on assets and the depreciation that

106

would have been chargeable based on their historical cost being transferred each year from the Revaluation Reserve to the Capital Adjustment Account.

V Component Accounting for Property Assets

Where a building has major components whose cost is significant in relation to the total cost of the item, the components are depreciated separately over the useful life of that component. The table below identifies the significant components and useful life.

Component Typical maximum useful life

Building Structure = substructure + superstructure including internal walls, windows and doors, but excludes roof, finishes and fittings.

60 years

Roof = flat roof types and non traditional pitched, pitched/tiled (excluding thatch).

50 years

Mechanical & Electrical (services) = water, heat, ventilation, electrics, lifts, fire, communications.

20 years

External Works = hard surfaces, below ground services (excludes fences).

45 years

The Council has applied a phased approach for its property assets to meet the Code’s prospective requirements. The application in the first year will be to:

Enhancement expenditure incurred over £500k,

Acquisition expenditure incurred over £500k, and

Revaluations carried out as part of the Council’s five year rolling programme of property valuations with a value over £500k.

As part of the rolling programme of building and land valuations, each valuation provides a value and remaining life for each significant component. Each year the Asset Register will be updated with this information. Therefore, all buildings above the de minimis of £500k will have been recorded on a component basis at the end of the five year programme.

VI Disposals and Non-Current Assets Held for Sale

When it becomes probable that the carrying amount of an asset will be recovered principally through a sale transaction rather than through its continuing use, it is reclassified as an Asset Held for Sale. The asset is revalued immediately before reclassification and then carried at the lower of this amount and fair value less costs to sell. Where there is a subsequent decrease to fair value less costs to sell, the loss is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Gains in fair value are recognised only up to the amount of any previous losses recognised in the Surplus or Deficit on Provision of Services. Depreciation is not charged on Assets Held for Sale. If assets no longer meet the criteria to be classified as Assets Held for Sale, they are reclassified back to non - current assets and valued at the lower of their carrying amount before they were classified as held for sale; adjusted for depreciation, amortisation or revaluations that would have been recognised had they not been classified as Held for Sale, and their recoverable amount at the date of the decision not to sell.

Assets that are to be abandoned or scrapped continue to be classified as Surplus Assets until they are removed from the Balance Sheet.

When an asset is disposed of or decommissioned, the carrying amount of the asset in the Balance Sheet (whether Property, Plant and Equipment or Assets Held for

107

Sale) is written off to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. Receipts from disposals (if any) are credited to the same line in the Comprehensive Income and Expenditure Statement also as part of the gain or loss on disposal (i.e. netted off against the carrying value of the asset at the time of disposal). Any revaluation gains accumulated for the asset in the Revaluation Reserve are transferred to the Capital Adjustment Account.

Amounts received for a disposal in excess of £10,000 are categorised as capital receipts credited to the Capital Receipts Reserve, and can then only be used for new capital investment or set aside to reduce the Council’s underlying need to borrow (the Capital Financing Requirement). Receipts are appropriated to the Reserve from the General Fund Balance in the Movement in Reserves Statement. The written off value of disposals is not a charge against Council tax, as the cost of fixed assets is fully provided for under separate arrangements for capital financing. Amounts are appropriated to the Capital Adjustment Account from the General Fund Balance in the Movement in Reserves Statement.

VII Investment Property

Investment properties are those that are used solely to earn rentals and/or for capital appreciation. The definition is not met if the property is used in any way to facilitate the delivery of services or production of goods or is held for sale. Investment properties are measured initially at cost and subsequently at fair value, based on the amount at which the asset could be exchanged between knowledgeable parties at arm’s length. Properties are not depreciated but are revalued annually according to market conditions at the year end. Gains and losses on revaluation are posted to the Financing and Investment Income and expenditure line in the Comprehensive Income and Expenditure Statement. The same treatment is applied to gains and losses on disposal. Rentals received in relation to investment properties are credited to the Financing and Investment Income line and result in a gain for the General Fund Balance. However, revaluation and disposal gains and losses are not permitted by statutory arrangements to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account and (for any sale proceeds greater than £10,000) the Capital Receipts Reserve.

VIII Charges to Revenue for Non - Current Assets

The Council’s services revenue accounts, support services and trading accounts are debited with the following amounts to record the cost of holding non - current assets during the year:

Depreciation attributable to the assets used by the relevant service;

Revaluation and impairment losses on assets used by the service where there are no accumulated gains in the Revaluation Reserve against which the losses can be recovered;

Amortisation of intangible fixed assets attributable to the service.

The Council is not required to raise council tax to fund depreciation, revaluation and impairment losses or amortisations. However, it is required to make an annual contribution from revenue towards the reduction in its overall borrowing requirement equal to an amount calculated on a prudent basis determined by the Council in accordance with statutory guidance. Depreciation, revaluation and impairment losses and amortisations are therefore replaced by the contribution in the General Fund Balance via the annual Minimum Revenue Provision (MRP) charge, by way of

108

an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two.

IX Revenue Expenditure Funded from Capital Under Statute

This represents expenditure incurred during the year that may be capitalised under statutory provisions but does not result in the creation of fixed assets belonging to the Council. This amount is charged to the relevant service revenue account in the year. This may include expenditure on assets not belonging to the Council such as service user homes and foundation schools. Where the Council has determined to meet the cost of this expenditure from existing capital resources or borrowings, a transfer to the Capital Adjustment Account is made to reverse out the amount charged so there is no impact on the level of Council tax.

1.4.18 Leases

Leases are classified as finance leases where the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the Property, Plant or Equipment from the lessor to the lessee. All other leases are classified as operating leases.

Where a lease covers both land and buildings, the land and buildings elements are considered separately for classification.

Arrangements that do not have the legal status of a lease but convey a right to use an asset in return for payment are accounted for under this policy where fulfilment of the arrangement is dependent on the use of specific assets.

I The Council as Lessee: Finance Leases

Property, Plant and Equipment held under finance leases are recognised on the Balance Sheet at the commencement of the lease at its fair value measured at the lease’s inception (or the present value of the minimum lease payments, if lower). The asset recognised is matched by a liability for the obligation to pay the lessor. Initial direct costs of the Council are added to the carrying amount of the asset. Premiums paid on entry into a lease are applied to writing down the lease liability. Contingent rents are charged as expenses in the periods in which they are incurred.

Lease payments are apportioned between:

A charge for the acquisition of the interest in the property, plant or equipment – applied to write down the lease liability;

A finance charge (debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement).

Property, Plant and Equipment recognised under finance leases is accounted for using the policies applied generally to such assets, subject to depreciation being charged over the lease term if this is shorter than the asset’s estimated useful life (where ownership of the asset does not transfer to the Council at the end of the lease period).

The Council is not required to raise council tax to cover depreciation or revaluation and impairment losses arising on leased assets. Instead, a prudent annual contribution is made from revenue funds towards the deemed capital investment in accordance with statutory requirements. Depreciation, revaluation and impairment losses are therefore substituted by a revenue contribution in the General Fund Balance, by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two.

109

Operating Leases

Rentals paid under operating leases are charged to the Comprehensive Income and Expenditure Statement as an expense of the services benefitting from use of the leased property, plant or equipment. Charges are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments (e.g., there is a rent-free period at the commencement of the lease).

II The Council as Lessor: Finance Leases

Where the Council grants a finance lease over a property or an item of plant or equipment, the relevant asset is written out of the Balance Sheet as a disposal. At the commencement of the lease, the carrying amount of the asset in the Balance Sheet (whether Property, Plant and Equipment or Assets Held for Sale) is written off to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. A gain, representing the Council’s net investment in the lease, is credited to the same line in the Comprehensive Income and Expenditure Statement also as part of the gain or loss on disposal (i.e. netted off against the carrying value of the asset at the time of disposal), matched by a lease (long term debtor) asset in the Balance Sheet.

Lease rentals receivable are apportioned between:

A charge for the acquisition of the interest in the property – applied to write down the lease debtor (together with any premiums received);

Finance income (credited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement)

The gain credited to the Comprehensive Income and Expenditure Statement on disposal is not permitted by statute to increase the General Fund Balance and is required to be treated as a capital receipt. Where a premium has been received, this is posted out of the General Fund Balance to the Capital Receipts Reserve in the Movement in Reserves Statement. Where the amount due in relation to the lease asset is to be settled by the payment of rentals in future financial years, this is posted out of the General Fund Balance to the Deferred Capital Receipts Reserve in the Movement in Reserves Statement. When the future rentals are received, the element for the capital receipt for the disposal of the asset is used to write down the lease debtor. At this point, the deferred capital receipts are transferred to the Capital Receipts Reserve.

The written off value of disposals is not a charge against council tax, as the cost of non - current assets is fully provided for under separate arrangements for capital financing. Amounts are therefore appropriated to the Capital Adjustment Account from the General Fund Balance in the Movement in Reserves Statement.

Operating Leases

Where the Council grants an operating lease over a property or an item of plant or equipment, the asset is retained in the Balance Sheet. Rental income is credited to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Credits are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments (e.g., there is a premium paid at the commencement of the lease). Initial direct costs incurred in negotiating and arranging the lease are added to the carrying amount of the relevant asset and charged as an expense over the lease term on the same basis as rental income.

110

1.4.19 Heritage Assets

Heritage Assets are a distinct class of asset which are reported separately from property, plant and equipment and intangible assets. The Council holds these assets principally for future generations because of their contribution to knowledge, environment or culture. The Code requires authorities to recognise heritage assets where the authority has information on the cost or value of the asset. Where information on cost or value is not available, and the cost of obtaining this information outweighs the benefits to the users of the financial statements, the asset is not recognised on the Council’s Balance Sheet. However, the Council makes appropriate disclosure in the accounts where heritage assets are not recognised on the Balance Sheet. Where valuations are made an appropriate method is adopted; this may include, for example, insurance valuations of museum collections. The Council reviews the carrying amounts of heritage assets carried at valuation on a yearly basis to ensure they remain current. Depreciation is not charged on heritage assets which have indefinite lives. However, an impairment review is carried out where there is physical deterioration or new doubts as to the authenticity of the Heritage Asset exist.

1.4.20 Financial Instruments

I Financial Liabilities

Financial liabilities are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value and are carried at their amortised cost. Annual charges to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest payable are based on the carrying amount of the liability, multiplied by the effective rate of interest for the instrument. The effective interest rate is the rate that exactly discounts estimated future cash payments over the life of the instrument to the amount at which it was originally recognised.

For most of the borrowings that the Council has, this means that the amount presented in the Balance Sheet is the outstanding principal repayable (plus accrued interest); and interest charged to the Comprehensive Income and Expenditure Statement is the amount payable for the year according to the loan agreement.

Gains and losses on the repurchase or early settlement of borrowing are credited and debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement in the year of repurchase/settlement. However, where repurchase has taken place as part of a restructuring of the loan portfolio that involves the modification or exchange of existing instruments, the premium or discount is respectively deducted from or added to the amortised cost of the new or modified loan, and the write-down to the Comprehensive Income and Expenditure Statement is spread over the life of the loan by an adjustment to the effective interest rate.

Where premiums and discounts have been charged to the Comprehensive Income and Expenditure Statement, regulations allow the impact on the General Fund Balance to be spread over future years. The Council has a policy of spreading the gain or loss over the term that was remaining on the loan against which the premium was payable or discount receivable when it was repaid. The reconciliation of amounts charged to the Comprehensive Income and Expenditure Statement to the net charge required against the General Fund Balance is managed by a transfer to or from the Financial Instruments Adjustment Account in the Movement in Reserves Statement.

111

II Financial Assets

Financial assets are classified into two types:

Loans and receivables – assets that have fixed or determinable payments but are not quoted in an active market;

Available-for-sale assets – assets that have a quoted market price and/or do not have fixed or determinable payments.

Loans and Receivables

Loans and receivables are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value. They are subsequently measured at their amortised cost. Annual credits to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest for the instrument. For most of the loans that the Council has made, this means that the amount presented in the Balance Sheet is the outstanding principal receivable (plus accrued interest) and interest credited to the Comprehensive Income and Expenditure Statement is the amount receivable for the year in the loan agreement.

However, the Council has made a number of loans to voluntary organisations at less than market rates (soft loans). When soft loans are made, a loss is recorded in the Comprehensive Income and Expenditure Statement (debited to the appropriate service) for the present value of the interest that will be foregone over the life of the instrument, resulting in a lower amortised cost than the outstanding principal. Interest is credited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement at a marginally higher effective rate of interest than the rate receivable from the voluntary organisations, with the difference serving to increase the amortised cost of the loan in the Balance Sheet. Statutory provisions require that the impact of soft loans on the General Fund Balance is the interest receivable for the financial year – the reconciliation of amounts debited and credited to the Comprehensive Income and Expenditure Statement to the net gain required against the General Fund Balance is managed by a transfer to or from the Financial Instruments Adjustment Account in the Movement in Reserves Statement.

Where assets are identified as impaired because of a likelihood arising from a past event that payments due under the contract will not be made, the asset is written down and a charge made to the relevant service (for receivables specific to that service) or the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The impairment loss is measured as the difference between the carrying amount and the present value of the revised future cash flows discounted at the asset’s original effective interest rate.

Any gains and losses that arise on the derecognition of an asset are credited or debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement.


Available-for-sale assets are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured and carried at fair value. Where the asset has fixed or determinable payments, annual credits to the Financing and Investment Income

112

and Expenditure line in the Comprehensive Income and Expenditure Statement for interest receivable are based on the amortised cost of the asset multiplied by the effective rate of interest for the instrument. Where there are no fixed or determinable payments, income (e.g. dividends) is credited to the Comprehensive Income and Expenditure Statement when it becomes receivable by the Council.

Assets are maintained in the Balance Sheet at fair value. Values are based on the following principles:

Instruments with quoted market prices – the market price;

Other instruments with fixed and determinable payments – discounted cash flow analysis;

Equity shares with no quoted market prices – independent appraisal of company valuations.

Changes in fair value are balanced by an entry in the Available for Sale Reserve and the gain/loss is recognised in the Surplus or Deficit on Revaluation of Available for Sale Financial Assets. The exception is where impairment losses have been incurred – these are debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement, along with any net gain or loss for the asset accumulated in the Available for Sale Reserve.

Where assets are identified as impaired because of a likelihood arising from a past event that payments due under the contract will not be made (fixed or determinable payments) or fair value falls below cost, the asset is written down and a charge made to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. If the asset has fixed or determinable payments, the impairment loss is measured as the difference between the carrying amount and the present value of the revised future cash flows discounted at the asset’s original effective interest rate. Otherwise, the impairment loss is measured as any shortfall of fair value against the acquisition cost of the instrument (net of any principal repayment and amortisation).

Any gains and losses that arise on the derecognition of the asset are credited or debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement, along with any accumulated gains or losses previously recognised in the Available for Sale Reserve.

Where fair value cannot be measured reliably, the instrument is carried at cost (less any impairment losses).

1.4.21 Inventories and Work in Progress

Inventories are included in the Balance Sheet at the lower of cost or net realisable value. Work in progress is recognised at cost and held in the Balance Sheet until the work has been completed.

1.4.22 Landfill Allowance Trading Scheme (LATS)

LATS became a statutory requirement on Waste Disposal authorities at the start of 2005-06. Authorities are granted annual allowances which can be traded.

Allowances granted are recorded in investments, waste disposal usage is recorded in creditors and the surplus is held in Earmarked Reserves the authority will measure the value of landfill allowances at the lower of cost or net realisable value. Where there is no evidence of an active market for landfill allowances the fair value and the net realisable value is likely to be nil.

113

1.4.23 Private Finance Initiative (PFI) transactions and similar contracts

The Code requires these contracts to be accounted for in a manner consistent with the adoption of International Financial Reporting Interpretations Committee (IFRIC) 12 Service Concession Arrangements as contained in the Government’s Financial Reporting Manual (FreM). The Code has determined that the Council shall account for PFI schemes where the Council controls the use of the Tangible Fixed Assets and the residual interest in the asset at the end of the arrangement as service concession arrangements, following the principles of the requirements of IFRIC 12. The Council therefore recognises the PFI assets as Tangible Fixed Assets together with a liability to pay for it. The services received under the contract are recorded as operating expenses.

The annual unitary payment is separated into the following component parts, using appropriate estimation techniques where necessary:

Payment for the value of services received;

Payment for the PFI asset, including finance costs; and

Payment for the replacement of components of the asset during the contract ‘lifecycle replacement’.

I Services received

The value of services received in the year is recorded under the relevant expenditure headings within ‘operating expenses’.

II PFI Asset

The PFI assets are recognised as Tangible Fixed Assets, when they come into use. The assets are measured at the lower of net current replacement cost or net realisable value in existing use.

III PFI liability

A PFI liability is recognised at the same time as the PFI assets are recognised. It is measured initially at the same amount as the value of the PFI assets and is subsequently measured as a finance lease liability in accordance with IFRIC12.

An annual finance cost is calculated by applying the implicit interest rate in the lease to the opening lease liability for the period, and is included in Interest Payable and similar charges within the Comprehensive Income and Expenditure Statement.

The element of the annual unitary payment that is allocated as a finance lease rental is applied to meet the annual finance cost and to repay the lease liability over the contract term.

An element of the annual unitary payment increase due to cumulative indexation is allocated to the finance lease. In accordance with IFRIC12, this amount is not included in the minimum lease payments, but is instead treated as contingent rent and is expensed as incurred. In substance, this amount is a finance cost in respect of the liability and the expense is included in Interest Payable and similar charges within the Comprehensive Income and Expenditure Statement.

IV Lifecycle replacement

Components of the asset replaced by the operator during the contract (‘lifecycle replacement’) are capitalised where they meet the Council’s criteria for capital expenditure. They are capitalised at the time they are provided by the operator and are measured initially at the lower of net current replacement cost or net realisable value in existing use.

114

The element of the annual unitary payment allocated to lifecycle replacement is pre-determined for each year of the contract from the operator’s planned programme of lifecycle replacement. Where the lifecycle component is provided earlier or later than expected, a reserve is recognised respectively.

Where the value of the lifecycle component is less than the amount determined in the contract, the difference is recognised as an expense when the replacement is provided.

V Assets contributed by the Council to the operator for use in the scheme

Assets contributed for use in the scheme continue to be recognised as Tangible Fixed Assets.

VI PFI credits

Government Grants received for PFI schemes, in excess of current levels of expenditure, are carried forward as an earmarked reserve to fund future contract expenditure and will be drawn down as required.

1.4.24 Minimum Revenue Provision (MRP)

The Council is required to make an annual provision from revenue to contribute towards the reduction in its overall borrowing requirement. This provision is known as the Minimum Revenue Provision (MRP).The Council assess its MRP in accordance with the main recommendations contained within the Guidance issued by the Secretary of State under section 21(1A) of the Local Government Act 2003.

A change in policy was introduced in 2015-16 for the proportion of the provision that relates to the historic debt liability that had accumulated to 31st March 2007. Up until 2014-15 this element of the provision was calculated using Option 1 of the Guidance, the “Regulatory Method”, which based the calculation on 4% of the Capital Financing Requirement, amended for Adjustment A, on a reducing balance basis. From 2015-16 this debt liability will be provided for using an annuity calculation methodology, allowable under the DCLG Guidance. In 2017-18 a historic debt liability the annuity method was applied, which is a prospective re-estimate applied to the 2017-18 and future year’s’ charges.

Capital expenditure incurred from 2007-08 onwards will be subject to MRP in the year after the asset has become operational. MRP will be provided for under Option 3 of the DCLG Guidance and will be based on the estimated useful life of the assets, using the annuity method. From 2017-18 the borrowing post 1 April 2008 element of the MRP calculation will apply the annuity method approved in 2015-16 for capital expenditure incurred in respect of borrowing since 1 April 2008. This was a prospective re-estimate to the 2017-18 and future year’s charges.

Estimated useful life periods will be determined under delegated powers. To the extent that expenditures do not create an asset, and are of a type that are subject to estimated life periods that are referred to in the Guidance, these estimated life periods will generally be adopted by the Council. However, in the case of long term debtors arising from loans or other types of capital expenditure made by the Council which will be repaid under separate credit arrangements such as leasing and PFI, there will be no Minimum Revenue Provision made.

The Council is satisfied that a prudent provision will be achieved after exclusion of capital expenditure.

In view of the variety of different types of capital expenditure incurred by the Council, which is not in all cases capable of being related to an individual asset, asset lives will be assessed on a basis which most reasonably reflects the

115

anticipated period of benefit that arises from the expenditure. The policy will be reviewed annually to ensure prudence is achieved from using the options available.

Any under or over provisions that are identified for previous years will be taken into consideration in the calculation of the current year’s provisions and adjusted accordingly.

1.4.25 Borrowing Costs

Borrowing costs that are:

Directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset;

When it is probable that they will result in future economic benefits or service potential to the Council; and

The costs can be measured reliably;

shall be capitalised and form part of the cost of that non current asset.

Borrowing costs form part of the cost of the non - current asset and are charged to revenue over the life of the asset in accordance with Minimum Revenue Provision (MRP) policy.

Where the Council borrows funds specifically for the purpose of obtaining a qualifying asset, the Council shall determine the amount of borrowing costs eligible for capitalisation as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings.

Where the Council borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Council shall apply a capitalisation rate to the expenditures on that asset. The capitalisation rate shall be the weighted average of the borrowing costs that are outstanding during the period.

The amount of borrowing costs capitalised shall not exceed the amount of borrowing costs incurred during the period.

Capitalisation

The commencement of capitalisation begins when all of the following are met:

Expenditure in respect of the asset are incurred;

Finance costs in respect of the asset are incurred; and

Activities that are necessary to develop an asset are in progress.

Capitalisation ceases when substantially all of the activities necessary to prepare the asset for its intended use or sale are complete.

Capitalisation should be suspended during periods in which active development is interrupted.

1.4.26 Events after the Reporting Period

Events after the balance sheet date are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Statement of Accounts is authorised for issue. Two types of events can be identified:

Those that provide evidence of conditions that existed at the end of the reporting period – the Statement of Accounts is adjusted to reflect such events.

116

Those that are indicative of conditions that arose after the reporting period – the Statement of Accounts are not adjusted to reflect such events, but where a category of events would have a material effect, disclosure is made in the notes of the nature of the events and their estimated financial effect.

Events taking place after the date of authorisation for issue are not reflected in the Statement of Accounts.

1.4.27 Foreign Currency Translation

Payments made in any other currency other than sterling are translated at the rate applicable on that date.

1.4.28 Interests in Companies and Other Entities

The Council is required to produce Group Accounts alongside its own financial statements where it has material interests in subsidiaries, associates and/or joint ventures. The Council has involvement with a number of companies, and has concluded that the requirement to produce Group Accounts applies in relation to its interest in Northamptonshire Trading Limited, Olympus Care Services Limited and First for Wellbeing CIC. In the Council’s single‐entity accounts, the interests in companies and other entities are recorded as financial assets at cost.

Within the Group Accounts the financial statements of Northamptonshire Trading Limited, Olympus Care Services Limited and First for Wellbeing CIC have been consolidated on a line by line basis, eliminating in full balances, transactions, income and expenses between the Council and the subsidiaries.

1.4.29 Fair Value Measurement

The authority measures some of its non-financial assets such as surplus assets and investment properties and some of its financial instruments such as equity shareholdings at fair value at each reporting date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place either:

In the principal market for the asset or liability; or

In the absence of a principal market, in the most advantageous market for the asset or liability.

The authority measures the fair value of an asset or liability using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

When measuring the fair value of a non-financial asset, the authority takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The authority uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

Inputs to the valuation techniques in respect of assets and liabilities for which fair value is measured or disclosed in the authority’s financial statements are categorised within the fair value hierarchy, as follows:

117

Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities that the authority can access at the measurement date;

Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly;

Level 3 – unobservable inputs for the asset or liability.

119

Northamptonshire

Local Government

Pension Scheme

Accounts

120

Fund Account, Net Assets Statement and Notes

Introduction to the accounts The following comprises the Statement of Accounts for the Northamptonshire Local Government Pension Scheme (The Fund). The accounts cover the financial year from 1 April 2018 to 31 March 2019. These accounts have been prepared in accordance with the Code of Practice on Local Authority Accounting (‘Code of Practice’) in the United Kingdom 2018-19 based on International Financial Reporting Standards (IFRS) as published by the Chartered Institute of Public Finance and Accountancy. The accounts have been prepared on an accruals basis. They do not take account of liabilities to pay pensions and other benefits in the future. The accounts are set out in the following order: Fund Account which discloses the size and nature of financial additions to and withdrawals from the Fund during the accounting period and reconciles the movements in the net assets to the Fund Account. Net Assets Statement which discloses the size and disposition of the net assets of the Fund at the end of the accounting period. Notes to the Accounts which gives supporting accounting policies, detail and analysis concerning the contents of the accounts, together with information on the establishment of the Fund, its membership and actuarial position.

121

Fund Account for the year ended 31 March 2019

2017-18 2018-19 £000 Notes £000

Dealings with members, employers and others directly involved in the Fund

(101,214) Contributions 7 (106,319)

(4,650) Transfers in from other Pension Funds 8 (5,856)

(105,864) (112,175)

89,807 Benefits 9 89,696 33,334 Payments to and on account of leavers 10 6,395

123,140 96,091

17,276 Net (additions)/withdrawals (16,084)

8,486 Management expenses 11 10,100

Returns on investments

(38,760) Investment income 13 (44,950) 470 Taxes on income 506

(26,406) (Profit) and losses on disposal of investments and changes in the market value of investments

14a 17b

(136,804)

(64,699) Net return on investments (181,248)

(38,937) Net (increase)/decrease in the net assets available for benefits during the year

(187,232)

(2,282,629) Opening net assets of the scheme (2,321,566)

(2,321,566) Closing net assets of the scheme (2,508,798)

Net Assets Statement as at 31 March 2019

31 Mar 2018

31 Mar 2019

£000 Notes £000

2,325,634 Investment assets

2,494,469

(3,549) Investment liabilities 14 (1,937)

2,322,085 Total net investments 2,492,532

20,019 Current assets 21 21,160

(20,538) Current liabilities 22 (4,894)

(519) Net Current Assets 16,266

2,321,566 Net assets of the Fund available to Fund benefits at the period end

17a 2,508,798

Notes to the accounts beginning on page 116 form part of the financial statements.

Note: The Fund’s financial statements do not take account of the liabilities to pay pensions and other benefits after the period end. The actuarial present value of promised retirement benefits is disclosed at Note 20.

122

Notes to the Accounts

1 Description of the Fund

1.Description of the Fund

The Northamptonshire County Council Fund is part of the Local Government Pension Scheme (LGPS) and is administered by Northamptonshire County Council. The County Council is the reporting entity for this Pension Fund. The following description of the Fund is a summary only. For more detail, reference should be made to the Annual Report 2018-19 published separately.

General

The Fund is governed by the Public Services Pensions Act 2013. The Fund is administered in accordance with the following secondary legislation:

•the LGPS Regulations 2013 (as amended);

•the LGPS (Transitional Provisions, Savings and Amendments) Regulations 2014 (as amended);

•the LGPS (Management and Investment of Funds) Regulations 2016.

The Fund is a contributory defined benefit pension scheme administered by Northamptonshire County Council to provide pensions and other benefits for pensionable employees of Northamptonshire County Council, the district councils in Northamptonshire, and a range of other scheduled and admitted bodies within the county area. Teachers, police officers and fire-fighters are not included as they come within other national pension schemes.

The Fund is overseen by the Northamptonshire Pensions Committee, which is a committee of Northamptonshire County Council.

Membership

Membership of the LGPS is voluntary and employees are free to choose whether to join the scheme, remain in the scheme or make their own personal arrangements outside the scheme. Organisations participating in the Northamptonshire Pension Fund include:

•Scheduled bodies - local authorities and similar bodies whose staff are automatically entitled to be members of the Fund;

•Admitted bodies - other organisations that participate in the Fund under an admission agreement between the Fund and the relevant organisation. Admitted bodies include voluntary, charitable and similar bodies or private contractors undertaking a local authority function following outsourcing to the private sector.

As at 31 March 2019 there are 145 (2018: 157) active employers within the Northamptonshire Pension Fund, including the County Council itself.

The Fund has over 66,000 individual members, as detailed below:

123

31-Mar-18 31-Mar-19

Number of employers with active members

157 145

Number of employees in scheme:

County council 6,815 8,049

Other employers 14,319 14,585

Total 21,134 22,634

Number of Pensioners:



Total 15,700 16,144

Deferred pensioners:



Total 28,420 22,190

Undecided Leavers:

County council * 2,360 Other employers * 2,922

Total 5,282

Total members 65,254 66,250

*included in deferred pensioners as at 31 March 18

c) Funding

Benefits are funded by contributions and investment earnings. Currently the level of

contribution income is sufficient to fund regular benefit payments. Contributions are

made by active members of the Fund in accordance with the LGPS Regulations 2013

and range from 5.5% to 12.5% of pensionable pay for the financial year ended 31

March 2019. Employers’ contributions are set as part of the triennial actuarial funding

valuation. The last such valuation was at 31 March 2016. Employers’ contributions

comprise a percentage rate on active payroll between 11% and 25.1% and deficit

payments of fixed cash amounts set for each employer as part of the triennial funding

valuation.

d) Benefits

Prior to 1 April 2014, pension benefits under the LGPS are based on final pensionable pay and length of pensionable service, summarised below:

124

Service pre 1 April 2008 Service from 1 April 2008 to 31 March 2014

Pension Each year worked is worth 1/80 x final pensionable salary.

Each year worked is worth 1/60 x final pensionable salary

Lump Sum Automatic lump sum of 3 x

pension. In addition, part of the annual pension can be exchanged for a one off tax free cash payment. A lump sum of £12 is paid for each £1 of pension given up.

No automatic lump sum. Part of the annual pension can be exchanged for a one off tax free cash payment. A lump sum of £12 is paid for each £1 of pension given up.

e) Career Average Revalued Earnings (CARE) scheme

From 1 April 2014, the scheme became a career average scheme, whereby

members accrue benefits based upon their pensionable pay in that year at an accrual

rate of 1/49th or 1/98th for those members who have taken up the 50/50 option and

pay proportionately lower contributions. Accrued pension is updated annually in line

with the Consumer Price Index.

There are a range of other benefits provided under the scheme including early

retirement, disability pensions and death benefits. For more details, please refer to

the Northamptonshire Pension Fund scheme handbook available from LGSS

Pension Services based at One Angel Square, Angel Street, Northampton NN1 1ED.

2 Basis of Preparation

The Statement of Accounts summarises the Fund’s transactions for the 2018-19 financial year and its position at year-end as at 31 March 2019. The accounts have been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2018-19 which is based upon International Financial Reporting Standards (IFRS), as amended for the UK public sector.

The accounts summarise the transactions of the Fund and report on the net assets available to pay pension benefits. The accounts do not take account of obligations to pay pensions and benefits which fall due after the end of the financial year.

3 Summary of Significant Accounting Policies

Fund account – revenue recognition

a) Contribution income

Normal contributions, both from the members and from the employer, are accounted for on an accruals basis at the percentage rate recommended by the Fund actuary in the payroll period to which they relate.

Employer deficit funding contributions are accounted for on the due date on which they are payable under the schedule of contributions set by the scheme actuary or on receipt if earlier than the due date.

Employers’ augmentation contributions and pensions strain contributions are accounted for in the period in which the liability arises. Any amount due in year but unpaid will be classed as a current financial asset. Amounts not due until future years are classed as long-term financial assets.

125

b) Transfers to and from other schemes Transfer values represent the amounts received and paid during the year for members who have either joined or left the Fund during the financial year are calculated in accordance with the Local Government Pension Scheme Regulations (see notes 8 and 10).

Individual transfers in/out are accounted for on an accruals basis, which is normally when the member liability is accepted or discharged.

Transfers in from members wishing to use the proceeds of their additional voluntary contributions (see below) to purchase scheme benefits are accounted for on a receipts basis and are included in Transfers In (see Note 8).

Bulk (group) transfers are accounted for on an accruals basis in accordance with the terms of the transfer agreement. c) Investment income

i) Interest income

Interest income is recognised in the Fund Account as it accrues, using the effective interest rate of the financial instrument as at the date of acquisition or origination. Income includes the amortisation of any discount or premium, transaction costs (where material) or other differences between the initial carrying amount of the instrument and its amount at maturity calculated on an effective interest rate basis.

ii) Dividend income

Dividend income is recognised on the date the shares are quoted ex dividend. Any amount not received by the end of the reporting period is disclosed in the Net Assets Statement as a current financial asset.

iii) Distributions from pooled funds

Distributions from pooled funds are recognised at the date of issue. Any amount not received by the end of the reporting period is disclosed in the net assets statement as a current financial asset.

iv) Movement in the net market value of investments

Changes in the net market value of investments are recognised as income or expenses and comprise all realised and unrealised profits/losses during the year.

d) Stock lending

Stock lending income is recognised in the Fund Account as it accrues. Stock lending income represents the transfer of securities by the Pension Fund to an approved counterparty (“Borrower”), against a receipt of collateral (non-cash), for a fee, subject to the obligation by that same counterparty to redeliver the same or similar securities back to the Lender at a future date. Securities on loan remain assets of the Fund and are recorded in the net assets statement at fair value.

Fund account – expense items

e) Benefits payable

Pensions and lump-sum benefits payable include all amounts known to be due as at the end of the financial year. Any amounts due but unpaid are disclosed in the net assets statement as current liabilities.

f) Taxation

The Fund is a registered public service scheme under section 1(1) of Schedule 36 of the Finance Act 2004 and as such is exempt from UK income tax on interest received and from capital gains tax on the proceeds of investments sold. Income from overseas investments

126

suffers withholding tax in the country of origin, unless exemption is permitted. Irrecoverable tax is accounted for as a Fund expense as it arises.

g) Management expenses

The Code does not require any breakdown of pension fund administrative expenses. However, in the interests of greater transparency, the Fund discloses its pension fund management expenses in accordance with CIPFA’s Accounting for Local Government Pension Scheme Management Expenses (2016).

h) Administrative expenses

All administrative expenses are accounted for on an accruals basis. All staff costs of the pensions administration team are charged direct to the Fund. Associated management, accommodation and other overheads are apportioned to this activity and charged as an expense to the Fund.

i) Oversight and governance costs

All oversight and governance expenses are accounted for on an accruals basis. All staff costs associated with governance and oversight are charged direct to the Fund. Associated management, accommodation and other overheads are apportioned to this activity and charged as expenses to the Fund.

j) Investment management expenses

Investment management expenses are accounted for on an accruals basis.

Fees of external Investment Managers and the Custodian are agreed in the respective mandates governing their appointments. Broadly, these are based on the market value of the investments under their management and therefore increase or reduce as the value of these investments change.

Where an Investment Manager’s fee note has not been received by the year end date, an estimate based upon the market value of their mandate as at the end of the year is used for inclusion in the Fund Account. In 2018-19, £0.8m of fees are based upon such estimates (2017-18: £ 0.5m). In addition, manager fees deducted from pooled funds of £1.5m (2017-18: £1.6m) are estimated based upon information received from fund managers.

The cost of obtaining investment advice from external consultants is charged direct to the Fund. All staff costs associated with investment activity are charged direct to the Fund. Associated management, accommodation and other overheads are apportioned to this activity and charged to the Fund.

The cost of obtaining investment advice from external consultants is charged direct to the Fund and A proportion of the Council’s costs representing management time spent by officers on investment management are also charged to the Fund.

Net Assets Statement

k) Financial assets

Financial assets are included in the Net Assets Statements on a fair value basis as at the reporting date. A financial asset is recognised in the net assets statement on the date the Fund becomes party to the contractual acquisition of the asset. From this date any gains or losses arising from changes in the fair value of asset are recognised in the Fund Account.

The values of investments as shown in the Net Assets Statement have been determined at fair value in accordance with the requirements of the Code and IFRS13 (see Note 16). For the purposes of disclosing levels of fair value hierarchy, the Fund has adopted the

127

classification guidelines recommended in Practical Guidance on Investment Disclosures (PRAG/Investment Association, 2016).

l) Foreign currency transactions

Dividends, interest and purchases and sales of investments in foreign currencies have been accounted for at the spot market rates at the date of transaction. End-of-year spot market exchange rates are used to value cash balances held in foreign currency bank accounts, market values of overseas investments and purchases and sales outstanding at the end of the reporting period.

m) Derivatives

The Fund uses derivative financial instruments to manage its exposure to specific risks arising from its investment activities. The Fund does not hold derivatives for speculative purposes (see Note 15).

n) Cash and cash equivalents

Cash comprises cash in hand and demand deposits and includes amounts held by the Fund’s external managers.

Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to minimal risk of changes in value.

o) Financial liabilities

The Fund recognises financial liabilities at fair value as at the reporting date, except for loans and receivables. A financial liability is recognised in the Net Assets Statement on the date the Fund becomes party to the liability. From this date any gains or losses arising from changes in the fair value of the liability are recognised by the Fund.

p) Actuarial present value of promised retirement benefits

The actuarial present value of promised retirement benefits is assessed on a triennial basis by the scheme actuary in accordance with the requirements of IAS 19 and relevant actuarial standards.

As permitted under IAS 26, the Fund has opted to disclose the actuarial present value of promised retirement benefits by way of a note to the net assets statement (Note 20).

q) Additional voluntary contributions

The Northamptonshire Pension Fund provides an additional voluntary contributions (AVC) scheme for scheme members, the assets of which are invested separately from those of the Pension Fund by the AVC provider. The Fund has appointed Prudential and Standard Life as its AVC providers. AVCs are paid to the AVC provider by employers and are specifically for providing additional benefits for individual contributors. Each AVC contributor receives an annual statement showing the amount held in their account and the movements in the year.

AVCs are not included in the accounts in accordance with section 4(1)(b) of the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016 but are disclosed as a note only (Note 23).

r) Contingent assets and liabilities

A contingent liability arises where an event has taken place prior to the year-end giving rise to a possible financial obligation whose existence will only be confirmed or otherwise by the occurrence of future events. Contingent liabilities can also arise in circumstances where a provision would be made, except that it is not possible at the balance sheet date to measure the value of the financial obligation reliably.

128

A contingent asset arises there an event has taken place giving rise to a possible asset whose existence will only be confirmed or otherwise by the occurrence of future events. Contingent assets and liabilities are not recognised in the net assets statement but are disclosed by way of a narrative in the notes.

4 Critical Judgement In Applying Accounting Policies

Pension Fund liability

The net Pension Fund liability is recalculated every three years by the Fund’s appointed actuary, with annual updates in the intervening years. The methodology used is in line with accepted guidelines. This estimate is subject to significant variances based on changes to the underlying assumptions which are agreed with the actuary and have been summarised in Note 19.

These actuarial revaluations are used to set future contribution rates and underpin the Fund’s most significant investment management policies, for example in terms of the balance struck between longer term investment growth and short-term investment yield/return.

5 Assumptions Made About The Future and Other Major

Sources Of Estimation Uncertainty

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities at the Balance Sheet date and the amounts reported for the revenues and expenses during the year. Estimates and assumptions are made taking into account historical experience, current trends and other relevant factors. However, the nature of estimation means that the actual outcomes could differ from the assumptions and estimates.

The items in the Net Assets Statement as at 31 March 2019 for which there is a significant risk of material adjustment in the forthcoming financial year are as follows:

Actuarial present value of promised retirement benefits

Uncertainties: Estimation of the net liability to pay pensions depends on a

number of complex judgements relating to the discount rate used, the rates at

which salaries and pensions are projected to increase, changes in retirement

ages, mortality rates and expected returns on Pension Fund assets. An

independent firm of consulting actuaries is engaged to provide the Fund with

expert advice about the assumptions to be applied.

Effect if actual results differ from assumptions: The effects on the net

pension liability of changes in individual assumptions can be measured. For

instance, a 0.5% decrease in the discount rate assumption would result in an

increase in the pension liability of £406 million. A 0.5% increase in assumed

earnings inflation would increase the value of liabilities by approximately £51

million, and a 1 year increase in assumed life expectancy would increase the

liability by approximately 3-5%

Private Equity

Uncertainties: Private equity investments are valued at fair value in

accordance with British Venture Capital Association guidelines. These

investments are not publicly listed and as such there is a degree of estimation

129

involved in the valuation

Effect if actual results differ from assumptions: The total private equity

investments in the financial statements are £26.1 million. There is a risk that

this investment may be under or overstated in the accounts.

6 Events After the Balance Sheet Date

There have been no events since 31 March 2019, and up to the date when these accounts were authorised that require any adjustments to these accounts.

7 Contributions Receivable

By category

2017-18 2018-19 £000 £’000

20,225 Employees’ contributions 20,480

Employers’ contributions: 59,001 Normal contributions 64,998

21,988 Deficit recovery contributions 20,841

80,989 Total Employers’ contributions 85,839

101,214 Total 106,319

By authority

2017-18 2018-19 £000 £000

25,943 Administering Authority 32,134 71,749 Scheduled Bodies 70,211 3,521 Admitted Bodies 3,974

101,214 Total 106,319

8 Transfers In From Other Pension Funds

2017-18 2018-19 £000 £000

4,650 Individual transfers 5,856

4,650 Total 5,856

9 Benefits Payable

By category

2017-18 2018-19 £000 £000

71,852 Pensions 74,602 16,571 Commutation and lump sum retirement benefits 13,014 1,383 Lump sum death benefits 2,080

89,807 Total 89,696

130

By authority

2017-18 2018-19 £000 £000

41,089 Administering Authority 39,184 41,986 Scheduled Bodies 42,926 6,731 Admitted Bodies 7,586

89,807 Total 89,696

10 Payments To and On Account of Leavers

2017-18 2018-19 £000 £000 314 Refunds to members leaving service 439 147 Payments for members joining state scheme -

25,035 Group transfers (804) 7,837 Individual transfers 6,760

33,334 Total 6,395

The credit shown against group transfers results from an over-estimate of a group transfer accrued in 2017-18.

11 Management Expenses

2017-18 2018-19 £000 £000

1,837 Administrative costs* 2,481

6,289 Investment expenses (See Note 12) 7,237

360 Oversight and governance costs 382

8,486 Total 10,100

* Administrative costs include an accounting correction of £824k in relation to the 2014/15 accounts

Fees payable to External Auditors, included within Oversight and governance costs, were £23k during the year (2017-18 £22k).

12 Investment Management Expenses

2017-18 2018-19 £000 £000

4,251 Management fees 4,585 1,679 Transaction costs 830

- Performance related fees 1,022 359 Other expenses 791

6,289 Total 7,237

13 Investment Income

2017-18 2018-19

£000 £000 26,844 Income from equities 32,417 3,252 Pooled investments – unit trusts and other managed

funds 3,489

8,059 Pooled Property Investments 7,663 - Private equity/infrastructure income 782

143 Interest on cash deposits 369 462 Other – securities lending income 230

38,760 Total 44,950

131

14 Investments

Market value Market value 31 March 2018 31 March 2019

£000 £000 Investment assets

847,092 Equities 901,836 1,251,479 Pooled investments 1,281,981

165,615 Pooled property investments 200,655 17,370

Private equity/infrastructure

62,296

Derivative contracts:

3 Forward currency contracts 7

40,526 Cash deposits 41,726 3,280 Investment income due 4,539

269 Amounts receivable for sales 1,429

2,325,634 Total investment assets 2,494,469

Investment liabilities Derivative contracts:

Forward currency contracts (12)

(3,548) Amounts payable for purchases (1,925)

(1) Amounts payable for pending spot FX 0

(3,549) Total investment liabilities (1,937)

2,322,085 Net investment assets 2,492,532

132

14a: Reconciliation of movements in investments and derivatives

Market value

1 April 2018

Purchases during the year and derivative payments

Sales during the year and

derivative receipts

Change in market value

during the year

Market value

31 March 2019

£000 £000 £000 £000 £000

Equities 847,092 192,571 (174,125) 36,298 901,836

Pooled investments 1,251,479 1,397,152 (1,448,178) 81,528 1,281,981

Pooled property investments

165,615 27,068 (6,741) 14,713 200,655

Private equity/ infrastructure

17,370 46,886 (5,555) 3,595 62,296

2,281,556 1,663,677 (1,634,599) 136,134 2,446,768


Forward currency contracts

3 915 (1,781) 858 (5)

2,281,559 1,664,592 (1,636,380) 136,992 2,446,763

Other investment balances:

Cash deposits 40,526* (173) 41,726

Amounts receivable for sales of investments

269 7 1,429

Investment income due

3,280 - 4,539

Spot FX contracts

(1) (27) -

Amounts payable for purchases of investments

(3,548) 5 (1,925)

Net investment assets

2,322,085 136,804 2,492,532

Note 17b

* Other Investment balances and Net investment assets do not add across as purchases, sales and

other movements are not disclosed here, in accordance with CIPFA guidance.

133

14a: Reconciliation of movements in investments and derivatives (continued)

Market value

1 April 2017

Purchases during the year and derivative payments

Sales during the year and derivative receipts

Change in market value

during the year

Market value

31 March 2018

£000 £000 £000 £000 £000

Equities 843,989 204,472 (193,081) (8,288) 847,092

Pooled investments 1,182,505 44,797 (8,394) 32,571 1,251,479

Pooled property investments

169,741 25,746 (31,319) 1,447 165,615

Private equity/ infrastructure

3,328 14,721 (1,664) 985 17,370

2,199,563 289,736 (234,458) 26,715 2,281,556


Forward currency contracts

53 365 (315) (100) 3

Spot currency contracts

0 0 0 0 0

2,199,616 290,101 (234,773) 26,615 2,281,559

Other investment balances:

Cash deposits 58,072* (125) 40,526

Amounts receivable for sales of investments

162 0 269

Investment income due

2,949 0 3,280

Spot FX contracts (2) (50) (1)

Amounts payable for purchases of investments

(3,918) (34) (3,548)

Net investment assets

2,256,879 26,406 2,322,085

* Other Investment balances and Net investment assets do not add across as purchases, sales and other movements are not disclosed here, in accordance with CIPFA guidance.

134

14b: Analysis of investments

31 March 2018 31 March 2019 £000 £’000

495,783 UK - Quoted 525,394 51,309 Overseas - Quoted 376,442

847,092

901,836 Pooled funds – additional analysis

202,457 UK - Fixed income Fixed income unit trust 214,133 24,498 UK - Equity 43,058 177,312 Overseas - Fixed income 181,617

847,212 Overseas - Equity 842,473 127 Overseas - Cash Fund 700

1,251,606

1,281,981

165,615 Pooled property investments 200,655 17,243 Private equity/ infrastructure 62,296

182,858 262,951 3 Derivatives 7

40,526 Cash deposits 41,726 3,280

269 Investment income due Amounts receivable from sales

4,539 1,429

44,078

47,701

2,325,634 Total investment assets 2,494,469 Investment liabilities Derivative contracts:

- Forward currency contracts (12) (1) Amounts payable for pending spot FX -

(3,548) Amounts payable for purchases (1,925) (3,549)

2,322,085

Total investment liabilities Net investment assets

(1,937)

2,492,532

135

14c. Investments analysed by fund manager

All the above companies are registered in the United Kingdom.

181,617 7.3

The following investments represent more than 5% of the net assets of the Fund.

Market value

31-Mar-18

% of net

investment

assets

Market value 31-

Mar-19

% of net

investment

assets

£'000 £'000

640 0 8,328 0.3

- - 11,114 0.5

8,528 0.4 17,110 0.7

187,087 8.1 303,421 12.2

678 0 Catapult 813 0

186,985 8.1 198,787 8

6,290 0.3 8,294 0.3

7,526 0.3 16,950 0.7

- - 7,984 0.3

266,942 11.5 277,083 11.1

361,610 15.6 401,110 16.1

111,311 4.8 Skagen - -

272,601 11.7 276,688 11.1

734,099 31.6 777,553 31.2

177,310 7.6 181,617 7.3

478 0 5,680 0.2

2,322,085 100 2,492,532 100

Investments managed outside of ACCESS asset pool:

Adams Street

Partners

Allianz Global

Investors

AMP Capital

Baillie Gifford & Co

CBRE Global

Investment Partners

CBRE Debt

HarbourVest

Partners (UK)

M&G Residential

Majedie Asset

Management

Net investment

assets

Newton Investment

Management

UBS Asset

Management

UBS Global Asset

Management

Wellington

Management

Cash with custodian

136

Security Market value 31 March 2018

£000

% of total Fund

Market value 31

March 2019

£000

% of total Fund

UBS Life World Equity Tracker 476,388 20.5

UBS Over 5 Year Index Linked Gilt 202,457 8.7 214,132 8.5

Baillie Gifford Diversified Growth Fund 187,087 8.1 303,441 12.1

14d: Stock lending

The Fund’s Investment Strategy sets the parameters for the Fund’s stock-

lending programme. At 31 March 2019, the value of quoted equities on

loan was £110.3m (31 March 2018: £119.1m). These equities continue to

be recognised in the Fund’s financial statements. Counterparty risk is

managed through holding collateral at the Fund’s custodian. At the year

end the custodian held collateral at fair value of £117.5m (31 March 2018:

£129m) representing 107% of stock lent. Collateral consists of acceptable

securities and government debt.

15 Analysis of Derivatives

Objectives and policies for holding derivatives

Most of the holding in derivatives is to hedge liabilities or hedge exposures to reduce risk in the Fund. Derivatives may be used to gain exposure to an asset more efficiently than holding the underlying asset. The use of derivatives is managed in line with the investment management agreement agreed between the Fund and the various investment managers.

Futures

The economic exposure represents the notional value of stock purchased under futures contracts and is therefore subject to market movements. There were no outstanding exchange traded future contracts at 31 March 2019 or 31 March 2018.

Forward foreign currency

In order to maintain appropriate diversification and to take advantage of overseas investment returns, a significant proportion of the Fund’s quoted equity portfolio is in overseas stock markets. To reduce the volatility associated with fluctuating currency rates, the Fund has a passive currency programme in place managed by the Fund managers.

There is no specified requirement to use currency hedging within the Fund’s Investment not any currency hedging should be used to mitigate any potential risk Management Agreements. Instead, the Fund managers use their discretion as to whether or or not any currency hedging should be used to mitigate any potential risk.

137

Currency Currenc£‘000 £‘000 £‘000 £‘000

Up to one

monthGBP 911 EUR -1,065 - -8

Up to one

monthGBP 168 JPY -24,585 - -2

One to six

monthsGBP 271 EUR -316 - -2

Up to one

monthJPY 107,636 GBP -740 7 -

Total 7 -12

-5

3 -1

2

Net forward currency contracts at 31 March 2019

Prior Year Comparative

Open forward currency contracts at 31 March 2018

Net forward currency contracts at 31 March 2018

Liability

ValueSettlement

Currency

bought

Local

Value

Currency

sold

Local

Value

Asset

Value

Options

In order to minimise the risk of loss of value through adverse equity price movements, equity option contracts can protect the Fund from falls in value in its main investment markets, principally the UK, USA and Europe. There were no outstanding option contracts at 31 March 2019 or 31 March 2018.

16 Fair Value

16 (a) Fair Value Hierarchy

Asset and liability valuations have been classified into three levels, according

to the quality and reliability of information used to determine fair values.

Transfers between levels are recognised in the year in which they occur. The

Fund has adopted the classification guidelines recommended in the Practical

Guidelines on Investment Disclosures (PRAG/Investment Association, 2016).

Level 1

Assets and liabilities at level 1 are those where the fair values are derived from unadjusted quoted prices in active markets for identical assets or liabilities. Products classified as level 1 comprise quoted equities, quoted fixed securities, quoted index-linked securities and unit trusts.

Level 2

Assets and liabilities at level 2 are those where quoted market prices are not available; for example, where an instrument is traded in a market that is not considered to be active, or where valuation techniques are used to determine fair value.

Level 3

Assets and liabilities at level 3 are those where at least one input that could have a significant effect on the instrument’s valuation is not based on observable market data.

The following table provides an analysis of the financial assets and liabilities of the Fund grouped into levels 1 to 3, based on the level at which the fair value is observable.

138

Values at 31 March 2019 Level 1 Level 2 Level 3 Total

£'000 £'000 £'000 £'000

Financial assets at fair value through

profit and loss1,648,911 640,382 161,314 2,450,607

Loans and Receivables 41,925 - - 41,925

Total financial assets 1,690,836 640,382 161,314 2,492,532

Level 1 Level 2 Level 3 Total

£'000 £'000 £'000 £'000

Financial assets at fair value through

profit and loss2,104,326 54,723 125,626 2,284,697

Loans and Receivables 43,176 43,176

Total financial assets 2,147,502 54,723 125,626 2,327,873

Values at 31 March 2018

There has been no change in the valuation techniques used for individual investments during the year.

All assets have been valued using fair value techniques which represent the highest and best price available at the reporting date. The fair valuation of each class of investment asset is set out below.

139

Description of

asset

Valuation

hierarchyBasis of valuation

Observable and

unobservable

inputs

Key sensitivities affecting the

valuations provided

Market quoted

investmentsLevel 1

Published bid market price

ruling on the final day of the

account period

Not required Not required

Quoted bonds Level 1

Fixed interest securities

valued at a market value

based on current yields

Not required Not required

Exchange traded

pooled

investments

Level 1Closing bid value on

published exchangesNot required Not required

Level 2Closing bid and offer prices

are published.

Closing single price where a

single price is published

Closing bid and offer prices

are published.

Closing single price where a

single price is published

Private equity

and infrastructure-

equity

Level 3Comparable valuation of

similar companies

Price/Earnings or

EBITDA multiple

Valuations could be affected by

material events occurring between

the date of the financial

statements provided and the

Fund’s own reporting date.

Private equity

and infrastructure

- other

Level 3

Comparable valuation of

similar companies in

accordance with International

Private Equity and Venture

Capital Valuation Guidelines

(2012)

Share of net assets





Fund’s own reporting date, and by

any differences between audited

and unaudited accounts.

Pooled

investments – not

exchange traded

open ended funds

NAV based pricing

set on a forward

pricing basis.

Not required

Pooled

investments – not

exchange traded

closed ended

funds

Level 3

NAV based pricing

set on a forward

pricing basis.





Fund’s own reporting date and

lack of liquidity.

140

Sensitivity of assets valued at Level 3 Having analysed historical data and current market trends, and consulted with independent investment advisers, the Fund has determined that the valuation methods described above are likely to be accurate within the following ranges, and has set out below the consequent potential impact on the closing value of investments held at 31 March 2019.

Asset TypeValue as at 31-

Mar-19

Assessed

valuation

range (+/-)

Value on

Increase

Value on

Decrease

£'000 £'000 £'000

Venture Capital 54,312 19.7 65,011 43,613

Equities 208 16.9 243 173

Property Funds 106,794 14.3 122,066 91,522

Total Assets 161,314 187,320 135,308 16(b )Reconciliation of Fair Value Measurements within Level 3

Market valueUnrealis

ed gains/

Realised

gains/

Market

value

01-Apr-18 (losses) (losses) 31-Mar-19

£'000 £'000 £'000 £'000 £'000 £'000

Venture Capital 17,243 38,901 -4,957 2,552 573 54,312

Equities 20,754 - -20,435 -111 - 208

Property Funds 87,629 20,713 -6,699 5,064 87 106,794

Total 125,626 59,614 -32,091 7,505 660 161,314

Period 2018-19

Purchases

during the year

and derivative

payments

Sales during

the year and

derivative

receipts

141

17 Financial Instruments

17a. Classification of financial instruments

The following table analyses the carrying amounts of financial assets and liabilities by category and net assets statement heading. No financial assets were reclassified during the year

Fair value

through

profit and

loss

Assets at

amortised

cost

Liabilities

at

amortised

cost

Fair value

through

profit and

loss

Assets at

amortised

cost

Liabilities at

amortised cost

£'000 £'000 £'000 £'000 £'000 £'000

Financial assets

847,092 - - Equities 901,836 - -

1,251,606 - -Pooled

investments1,281,981 - -

165,615 - -Pooled property

investments200,655 - -

Private equity/

infrastructure

3 - -Derivative

contracts7 - -

- 49,276 - Cash - 53,696 -

- 3,549 -Other investment

balances- 5,968 -

- 11,269 - Debtors - 9,190 -

2,281,559 64,094 - 2,446,775 68,854 -

Financial

liabilities

- -Derivative

contracts- - -12

- - -3,549Other investment

balances- - -1,925

- - -20,538 Creditors - - -4,894

- - -24,087 - - -6,831

2,281,559 64,094 -24,087 2,446,775 68,854 -6,831

Total2,321,566 2,508,798

31-Mar-18 31-Mar-19

17,243 - - 62,296 - -

142

17b: Net gains and losses on financial instruments

18 Nature and Extent of Risks Arising From Financial Instruments

Risk and risk management

The Fund’s primary long-term risk is that the Fund’s assets will fall short of its liabilities (i.e. promised benefits payable to members). Therefore the aim of investment risk management is to minimise the risk of an overall reduction in the value of the Fund and to maximise the opportunity for gains across the whole Fund portfolio. The Fund achieves this through asset diversification to reduce exposure to market risk (price risk, currency risk and interest rate risk) and credit risk to an acceptable level. In addition, the Fund manages its liquidity risk to ensure there is sufficient liquidity to meet the Fund’s forecast cash flows. The Council manages these investment risks as part of its overall Pension Fund risk management programme.

Responsibility for the Fund’s risk management strategy rests with the Pensions Committee. Risk management policies are established to identify and analyse the risks faced by the Council’s pensions operations. Policies are reviewed regularly to reflect changes in activity and in market conditions.

31-Mar-18 31-Mar-19

£'000 £'000

Financial assets:

26,715Fair value through profit

and loss136,134

-

Amortised cost – realised

gains on de-recognition of

assets

12

-Amortised cost –

unrealised gains-

Financial liabilities:

-100Fair Value through profit

and loss858

-209

Amortised cost – realised

losses on de-recognition

of assets

-200

-Amortised cost –

unrealised losses-

26,406 Total gains 136,804

143

a) Market risk

Market risk is the risk of loss from fluctuations in equity and commodity prices, interest and foreign exchange rates and credit spreads. The Fund is exposed to market risk from its investment activities, particularly through its equity holdings. The level of risk exposure depends on market conditions, expectations of future price and yield movements and the asset mix.

The objective of the Fund’s risk management strategy is to identify, manage and control market risk exposure within acceptable parameters, whilst optimising the return on risk.

In general, excessive volatility in market risk is managed through the diversification of the portfolio in terms of geographical and industry sectors and individual securities. To mitigate market risk, the Council and its investment advisers undertake appropriate monitoring of market conditions and benchmark analysis.

The Fund manages these risks in two ways:

- the exposure of the Fund to market risk is monitored through a factor risk analysis, to ensure that risk remains within tolerable level;

- Specific risk exposure is limited by applying risk weighted maximum exposures to individual investments.

Equity futures contracts and exchange traded option contracts on individual securities may also be used to manage market risk on equity investments. It is possible for over-the-counter equity derivative contracts to be used in exceptional circumstances to manage specific aspects of market risk.

b) Other price risk

Other price risk represents the risk that the value of a financial instrument will fluctuate as a result of changes in market prices (other than those arising from interest rate risk or foreign exchange risk), whether those changes are caused by factors specific to the individual instrument or its issuer or factors affecting all such instruments in the market.

The Fund is exposed to share and derivative price risk. This arises from investments held by the Fund for which the future price is uncertain. All securities investments present a risk of loss of capital. Except for shares sold short, the maximum risk resulting from financial instruments is determined by the fair value of the financial instruments. Possible losses from shares sold short are unlimited.

The Fund’s investment managers mitigate this price risk through diversification and the selection of securities and other financial instruments is monitored by the Council to ensure it is within limits specified in the Fund investment strategy.

c) Other price risk – sensitivity analysis

Following analysis of historical data and expected investment return movement during the financial year, in consultation with the Fund’s investment advisers, the Council has determined that the following movements in market price risk would have reasonably been possible for the 2018/19 reporting period.

The potential price changes disclosed below are broadly consistent with one-standard deviation movement in the value of the assets. The sensitivities are consistent with the assumptions contained in the investment adviser’s most recent review. This analysis assumes that all other variables, in particular foreign currency exchange rates and interest rates, remain the same.

144

Asset TypePotential Market

Movement +/- (%p.a.)

UK equities 16.60%

Overseas equities 16.90%

Global pooled equities 16.90%

Diversified Growth Fund 12.50%

Index Linked Bonds 7.20%

Pooled fixed interest bonds 10.50%

Property 14.30%

Alternatives 19.70%

Cash and Other investment

balances0.50%

Had the market price of the fund investments increased/decreased in line with the above, the change in the net assets available to pay benefits would have been as follows:

Asset Type Value as atValue on

Increase

Value on

Decrease

31-Mar-19

£'000 £'000 £'000

UK equities 568,452 16.6 662,815 474,089

Overseas equities 376,442 16.9 440,061 312,823

Global pooled equities 539,032 16.9 630,129 447,936

Diversified Growth Fund 303,441 12.5 341,371 265,511

Index Linked Bonds 214,133 7.2 229,550 198,715

Pooled fixed interest bonds 181,617 10.5 200,687 162,547

Property 200,655 14.3 229,349 171,962

Alternatives 62,296 19.7 74,545 50,048


balances46,464 0.5 46,697 46,232

Total Assets 2,492,532 2,855,204 2,129,863

Asset TypeValue as at

Value on

Increase

Value on

Decrease

31-Mar-18

£'000 £'000 £'000

UK equities 520,281 16.8 607,688 432,874

Global equities 1,011,434 17.9 1,192,481 830,387

Diversified Growth Fund 187,085 12.6 210,660 163,514

Index-linked bonds 202,457 9.2 221,083 183,831

Pooled fixed interest bonds 177,312 12.7 199,831 154,793

Property 165,615 14.3 189,298 141,932

Alternatives 17,243 20.1 20,709 13,777


balances40,658 0.5 40,861 40,455

Total Assets 2,322,085 2,682,611 1,961,563

%

(rounded)

Change

%

(rounded)

Change

145

Interest rate risk

The Fund invests in financial assets for the primary purpose of obtaining a return on investments. These investments are subject to interest rate risks, which represent the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Fund’s interest rate risk is routinely monitored by the Council and its investment consultant in accordance with the Fund’s risk management strategy, including monitoring the exposure to interest rates and assessment of actual interest rates against the relevant benchmarks. The Fund’s direct exposure to interest rate movements as at 31 March 2019 and 31 March 2018 is set out below. These disclosures present interest rate risk based on the underlying financial assets at fair value. Interest rate risk sensitivity analysis

The Council recognises that interest rates can vary and can affect both income to the Fund and the carrying value of fund assets, both of which affect the value of the net assets available to pay benefits. An 80 basis point movement in interest rates is consistent with the level of sensitivity applied as part of the Fund’s risk management strategy.

The Fund’s investment adviser has advised that long-term average rates are expected to move less than 80 basis points from one year to the next and experience suggests that such movements are likely.

The analysis that follows assumes that all other variables, in particular exchange rates, remain constant, and shows the effect in the year on the net assets available to pay benefits of a +/- 100 basis points change in interest rates:

This analysis demonstrates that a 1% increase in interest rates will not affect the interest received on fixed interest assets but will reduce their fair value, and vice versa. Changes in interest rates do not impact on the value of cash and cash equivalent balances but they will affect the interest income received on those balances. Changes to both the fair value of the assets and the income received from investments impact on the net assets available to pay benefits.

31-Mar-18 Asset Type 31-Mar-19

£'000 £'000

40,526 Cash and cash equivalents 41,726

8,750 Cash balances 11,970

202,457 Index-linked securities 214,132

177,312 Fixed interest securities 181,617

429,045 Total 449,445

146

Asset values at

31-Mar-19

£'000 £'000 £'000

Cash and cash

equivalents41,726 41,726 41,726

Cash balances 11,970 11,970 11,970

Index-linked securities 214,132 216,274 211,991

Fixed interest securities 181,617 183,433 179,801

Total change in assets

available449,445 453,403 445,488

Asset values at

31-Mar-18

£'000 £'000 £'000

Cash and cash

equivalents40,526 40,526 40,526

Cash balances 8,750 8,750 8,750

Index-linked securities 202,457 204,482 200,432


Total change in assets

available429,045 432,843 425,247

Interest receivable

2018-19

£'000 £'000 £'000

Cash deposits, cash and

cash equivalents369 373 365

Index-linked securities - - -


Total 3,292 3,325 3,259

Interest receivable

2017-18

£'000 £'000 £'000

Cash deposits, cash and

cash equivalents143 144 142

Index-linked securities - - -

Fixed interest securities - - -

Total 143 144 142

Exposure to interest

rate risk

Value on 1%

increase

Value on 1%

decrease


rate risk

Value on 1%

increase

Value on 1%

decrease


rate risk

Impact of 1%

decrease

Impact of 1%

increase


rate risk

Impact of 1%

decrease

Impact of 1%

increase

This analysis demonstrates that a 1% increase in interest rates will not affect the interest received on fixed interest assets but will reduce their fair value, and vice versa. Changes in interest rates do not impact on the value of cash and cash equivalent balances but they will affect the interest income received on those balances. Changes to both the fair value of the assets and the income received from investments impact on the net assets available to pay benefits.

Currency risk

Currency risk represents the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Fund is exposed to currency risk on financial instruments that are denominated in any currency other than the functional currency of the Fund (GBP). The fund holds both monetary and non-monetary assets denominated in currencies other than GBP.

147

The Fund’s currency rate risk is routinely monitored by the Council and its investment advisers in accordance with the Fund’s risk management strategy, including monitoring the range of exposure to currency fluctuations.

a) Currency risk – sensitivity analysis

Following analysis of historical data with the Fund’s investment advisers, the Council considers the likely volatility associated with foreign exchange rate movements to be 10% (as measured by one standard deviation).

A 10.0% (31 March 2018: 10.0%) fluctuation in the currency is considered reasonable based on the Fund adviser’s analysis of long-term historical movements in the month-end exchange rates over a rolling 36 month period. This analysis assumes that all other variables, in particular interest rates, remain constant. A 10.0% strengthening/weakening of the pound against the various currencies in which the fund holds investments would decrease/increase the net assets available to pay benefits as follows.

Value at

31-Mar-19

£'000 £'000 £'000 £'000

Overseas Equities 1,218,915 121,892 1,340,807 1,097,024

Overseas Fixed

Income181,617 18,162 199,779 163,455

Overseas Cash Fund 700 70 770 630

Total 1,401,232 140,124 1,541,356 1,261,109

Value at

31-Mar-18

£'000 £'000 £'000 £'000

Overseas Equities 1,198,521 119,852 1,318,373 1,078,669

Overseas Fixed

Income177,312 17,731 195,043 159,581

Overseas Cash Fund 127 13 140 114

Total 1,375,960 137,596 1,513,556 1,238,364

Assets exposed to

currency risk

Potential

market

movement

Value on

increase

Value on

decrease

Assets exposed to

currency risk

Potential

market

movement

Value on

increase

Value on

decrease

b) Credit risk

Credit risk represents the risk that the counterparty to a transaction or a financial instrument will fail to discharge an obligation and cause the Fund to incur a financial loss. The market values of investments generally reflect an assessment of credit in their pricing and consequently the risk of loss is implicitly provided for in the carrying value of the Fund’s financial assets and liabilities.

In essence the Fund’s entire investment portfolio is exposed to some form of credit risk, with the exception of the derivatives positions, where the risk equates to the net market value of a positive derivative position. However the selection of high quality counterparties, brokers and financial institutions minimises credit risk that may occur through the failure to settle a transaction in a timely manner.

Contractual credit risk is represented by the net payment or receipts that remains outstanding, and the cost of replacing the derivative position in the event of a counterparty default. The residual risk is minimal due to the various insurance policies held by the exchanges to cover defaulting counterparties.

148

Credit risk on over-the-counter derivative contracts is minimised as counterparties are recognised financial intermediaries with acceptable credit ratings determined by a recognised rating agency.

Deposits are not made with banks and financial institutions unless they are rated independently and meet the Council’s credit criteria. The Council has also set limits as to the maximum percentage of the deposits placed with any one class of financial institution.

The Council believes it has managed its exposure to credit risk, and has had no experience of default or uncollectible deposits over the past five financial years. The Fund’s cash holding under its treasury management arrangements at 31 March 2019 was £53.7m (31 March 2018: £44.4m). This was held with the following institutions:-

Rating 31-Mar-18 31-Mar-19

£'000 £'000

Money market funds

Northern Trust Global

Investors Global Cash FundAaa-mf 40,397 41,535

UK Treasury Bills 0 0

Bank deposit account

Barclays Bank A 8,750 11,970

Bank current accounts

Northern Trust custody

accountsP-1 129 191

Total 49,276 53,696

c) Liquidity risk

Liquidity risk represents the risk that the Fund will not be able to meet its financial obligations as they fall due. The Fund therefore takes steps to ensure that it has adequate cash resources to meet its commitments. This will particularly be the case for cash from the cash flow matching mandates from the main investment strategy to meet the pensioner payroll costs; and also cash to meet investment commitments. The Fund has immediate access to its cash holdings, with the exception of holdings that are for a fixed term when the deposit is placed. The Fund defines liquid assets as assets that can be converted to cash within three months. Illiquid assets are those assets which will take longer than three months to convert in to cash. As at 31 March 2019 the value of illiquid assets was £263.0m, which represented 10.5% of the total Fund assets (31 March 2018: £182.9m, which represented 7.9% of the total Fund assets). Management prepares periodic cash flow forecasts to understand and manage the timing of the Fund’s cash flows. The appropriate strategic level of cash balances to be held forms part of the Fund investment strategy. All financial liabilities at 31 March 2019 are due within one year.

d) Refinancing risk

The key risk is that the Fund will be bound to replenish a significant proportion of its Pension Fund financial instruments at a time of unfavourable interest rates. The Fund does not have any financial instruments that have a refinancing risk as part of its investment strategy.

149

19 Funding Arrangements

In line with the Local Government Pension Scheme Regulations 2013, the Fund’s actuary undertakes a funding valuation every three years for the purpose of setting employer contribution rates for the forthcoming triennial period. The last such valuation took place as at 31 March 2016. The next valuation will take place as at 31 March 2019.

The key elements of the funding policy are:

to ensure the long-term solvency of the Fund, i.e. that sufficient funds are available to meet all pension liabilities as they fall due for payment;

to ensure that employer contribution rates are as stable as possible;

to minimise the long-term cost of the scheme by recognising the link between assets and liabilities and adopting an investment strategy that balances risk and return;

to reflect the different characteristics of employing bodies in determining contribution rates where the administering authority considers it reasonable to do so;

to use reasonable measures to reduce the risk to other employers and ultimately to the council tax payer from an employer defaulting on its pension obligations.

The aim is to achieve 100% solvency over a maximum period of 20 years and to provide stability in employer contribution rates by spreading any increases in rates over a period of time. Solvency is achieved when the funds held, plus future expected investment returns and future contributions are sufficient to meet expected future pension benefits payable. Where an employer’s funding level is less than 100%, a deficit recovery plan is put in place requiring additional contributions from the employer to meet the shortfall.

At the 2016 actuarial valuation, the Fund was assessed as 78.4% funded (70.5% at the March 2013 valuation). This corresponded to a deficit of £517m (2013 valuation: £646m) at that time.

The Contribution Objective is achieved by setting employer contributions which are likely to be sufficient to meet both the cost of new benefits accruing and to address any funding deficit relative to the funding target over the agreed time horizon. A secondary objective is to maintain where possible relatively stable employer contribution rates.

For each employer in the Fund, to meet the Contribution Objective, a primary contribution rate has been calculated in order to fund the cost of new benefits accruing in the Fund. Additionally, if required, a secondary contribution rate has also been calculated to target a fully funded position within the employer’s set time horizon.

The table below summarises the whole fund Primary and Secondary Contribution rates at the 2016 triennial valuation. These rates are the payroll weighted average of the underlying individual employer primary and secondary rates, calculated in accordance with the Regulations and CIPFA guidance.

Primary Rate %

1 April 2017 to 31 March 2020 2017/18 2018/19 2019/20

17.10% £24,731,000 £22,348,000 £23,214,000

Secondary Rate %

The Primary rate above includes an allowance of 0.7% of pensionable pay for the Fund’s expenses. The average employee contribution rate is 6.3% of pensionable pay. Full details of the contribution rates payable can be found in the 2016 actuarial valuation report and the funding strategy statement on the Fund’s website. At the previous formal valuation at 31 March 2013, a different regulatory regime was in force. Therefore a contribution rate that is directly comparative to the rates above is not provided.

150

Basis of valuation

The valuation of the Fund has been undertaken using the projected unit method under which the salary increase for each member is assumed to increase until they leave active service by death, retirement or withdrawal from service. The principal assumptions were:

Financial assumptions

A summary of the main financial assumptions adopted for the valuation of members’ benefits are shown below.

*Plus an allowance for promotional pay increases.

Mortality assumptions

Assumed life

expectancy at Male Female Male Female

2013 valuation 24 26.6 22.3 24.3

2016 valuation 23.9 26.1 22.1 24.2

Active and Deferred Members Current Pensioners

Note that the figures for active and deferred members assume that they are aged 45 at the valuation date.

Various scaling factors have been applied to the mortality tables to reflect the predicted longevity for each class of member and their dependants. Other demographic valuation assumptions:

a) Retirements in ill health Allowance has been made for ill-health retirements before Normal Pension Age.

b) Withdrawals Allowance has been made for withdrawals from service.

c) Family details A varying proportion of members are assumed to be married (or have an adult dependant) at retirement or on earlier death. For example, at age 60 this is assumed to be 90% for males and 85% for females. Husbands are assumed to be 3 years older than wives.

d) Commutation Future pensioners are assumed to elect to exchange pension for additional tax-free cash up to 25% of HMRC limits for service to 31 March 2008 and 63% of HMRC limits for service from 1 April 2008.

Assumption Description Nominal Real Nominal Real

Price inflation (RPI) 3.30% - 3.30% -

Price Inflation

(CPI)/ Pension

increases

2.10% - 2.50% -

Pay increases -

2016RPI minus 0.7% p.a.* 2.40% -0.70% n/a n/a

Pay increases -

2013RPI plus 1% p.a.* n/a n/a 4.30% 1.00%

Funding basis

discount rate

“Gilt-based” discount rate

plus an Asset

Outperformance

Assumption of 1.8% p.a.

(2013: 1.6% p.a).

4.00% n/a 4.60% n/a

31-Mar-16 31-Mar-13

151

e) 50:50 option 5.0% of members (uniformly distributed across the age, service and salary range) are assumed to choose the 50:50 option.

20 Actuarial Present Value of Promised Retirement Benefits

In addition to the triennial funding valuation, the Fund’s actuary also undertakes a valuation of the Pension Fund liabilities, on an IAS 19 basis, every year using the same base data as the funding valuation rolled forward to the current financial year, taking account of changes in membership numbers and updating assumptions to the current year.

In order to assess the value of the benefits on this basis, the actuary has updated the actuarial assumptions (set out below) from those used for funding purposes (see Note 19).The actuary has also used valued ill health and death benefits in line with IAS 19.

31-Mar-18 31-Mar-19

£m £m

-3454Present value of promised

retirement benefits-3,878

2,322Fair value of scheme assets

(bid value)2,510

-1,132 Net liability -1,368

As noted above, the liabilities are calculated on an IAS 19 basis and therefore will differ from the results of the 2016 triennial funding valuation (see Note 19) because IAS 19 stipulates a discount rate rather than a rate which reflects market rates.

152

Assumptions used

31-Mar-18 31-Mar-19

% p.a. % p.a.

Inflation/pension increase

rate assumption2.4 2.5

Salary increase rate 2.7 2.8

Discount rate 2.7 2.4

Assumptions

21 Current Assets

31-Mar-18 31-Mar-19

£'000 £'000

Debtors:

1,805 Contributions due – members 1,563

3,779 Contributions due – employers 5,767

1,749 Other debtors 1,309

3,936 Funds due from County Council 551

11,269 9,190

8,750 Cash balances 11,970

8,750 11,970

20,019 21,160

153

22 Current Liabilities

31-Mar-18 31-Mar-19

£'000 £'000

328 Benefits payable 543

17,236 Other creditor 3,950

2,974 Funds due to County Council 401

20,538 4,894

23 AVC The Fund provides an additional voluntary contributions (AVC) scheme for its members, the assets of which are invested separately from those of the Pension Fund.

AVCs are not included in the accounts, in accordance with section 4(1)(b) of the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016, but are disclosed as a note only.

Market

value 31-Mar-

Market value

31-Mar-19

£'000 £'000

4,700 Prudential 4,863

727 Standard Life 655

5,427 5,518

24 Agency Services

Agency Services represent activities administered by the Fund on behalf of scheme employers which are not included within the Fund Account but are provided as a service and are fully reclaimed from the employer bodies.

31-Mar-18 31-Mar-19

£'000 £'000

2,551Unfunded

pensions2,552

2,551 2,552

25 Related Party Transactions

Northamptonshire County Council

The Northamptonshire County Council Pension Fund is administered by Northamptonshire County Council. Consequently there is a strong relationship between the Council and the Fund.

The Council incurred costs of £1.8m (2017-18: £1.9m) in relation to the administration of the Fund and was subsequently reimbursed by the Fund for these expenses.

The Council is also the single largest employer of members of the Pension Fund and contributed £25.9m of employer’s contributions to the Fund in 2018-19 (2017-18: £20.7m).

At 31 March 2019 there was £150k due to the Council by the fund (31 March 2018: £962k was due to the Fund by the Council)

154

Governance

The following Pension Committee members declared a personal interest due to either being a member of the scheme themselves or having a family member in the scheme: Councillor Bill Parker, Councillor Stephen Legg, Councillor Richard Micklewright, Councillor Julie Brookfield, Robert Austin, Peter Borley-Cox, Damian Pickard, Andy Langford and Janet Blunden.

County Council members have declared their interests in their Register of Members’ Interests. Other members of the Pension Committee are required to declare their interests at each meeting. 25(a) KEY MANAGEMENT PERSONNEL The administration of the Fund is provided by LGSS Pensions which is a shared service arrangement between Northamptonshire County Council and Cambridgeshire County Council. The Head of Pensions in the shared service unit reported directly to the LGSS Director of Finance, followed by the Interim Managing Director of LGSS, whose costs are reported in the Northamptonshire County Council statement of accounts. Other key personnel include the Section 151 Officer, who is Treasurer to the Fund, and the Head of HR. The Interim Managing Director of LGSS, the Section 151 Officer and the Head of HR are remunerated for their services to the organisation as a whole and it is not possible to identify within the overhead charge from LGSS the proportion of costs relating to these services to the Fund.

26 Contingent Liabilities and Contractual Commitments

Outstanding capital commitments at 31 March 2019 totalled £252.6m (31 March 2018:

£131.4m).

These commitments relate to outstanding call payments due on unquoted limited partnership funds held in the private equity and infrastructure parts of the portfolio. The amounts ‘called’ by these funds are irregular in both size and timing over a period of between three and fifteen years from the date of each original commitment

27 Contingent Assets

Four admitted body employers in the Northamptonshire Fund hold insurance bonds to guard against the possibility of being unable to meet their pension obligations. These bonds are drawn in favour of the Pension Fund and payment will only be triggered in the event of employer default.

155

Glossary Accrual An accrual is a sum included in our accounts to cover income or expenditure which belongs to the period covered by our accounts, but which was unpaid at the accounting date. Accrued liabilities This is a sum entered in our accounts for a liability relating to and charged for in the current accounting period but unpaid at the accounting date. Actuarial valuation An actuary undertakes valuations by checking what a pension scheme’s assets are worth compared to its liabilities. The actuary then works out how much needs to be paid into the scheme by the employer and the members to make sure that there will be enough money to pay the pensions when they are due. Actuary An actuary is an expert on pension scheme assets and liabilities. Agency services These are services we provide for other organisations, or services other organisations provide for us. Amortisation Spreading the value of an asset or liability over its useful life. Available for Sale Financial Instruments Reserve This reserve holds gains on revaluation of investments not yet realised through sales. Balance sheet A balance sheet is a summary of an organisation’s financial position. It lists the values, in the books of account on a particular date, of all the organisation’s assets and liabilities. Capital Adjustment Account This account accumulates the write down of the historical cost of fixed assets as they are consumed by depreciation and impairment, or written off on disposal. It also accumulates the resources that have been set aside to finance capital expenditure. Capital receipts These are the proceeds from selling fixed assets such as land or vehicles. Capital receipts unapplied These are proceeds from selling fixed assets which we can use for capital spending or to repay loans, but which we cannot use for revenue (day to day) spending. Carry forward Amounts that are to be carried forward into the new financial year. Cash equivalents Assets that are readily convertible into cash. CIPFA Chartered Institute of Public Finance and Accountancy Creditor This is someone we owe money to. Current assets These are short-term assets, which constantly change in value such as stocks, debtors and bank balances. Current liabilities These are short-term liabilities which are due to be paid in less than one year such as bank overdrafts, PAYE and money owed to suppliers. Debtor This is someone who owes us money.

156

DCSF Department for Children Schools and Families Delegated (budgets) Budgets for which schools have complete autonomy in spending decisions. Depreciation Spreading the cost of wear and tear of an asset over its useful life. Devolved (budgets) Budgets transferred to schools that have total responsibility for their spending within defined limits / scope / range. Earmarked reserve An earmarked reserve is money set aside for a specific purpose. Equities Equities are ordinary shares in companies. Financial Instruments Financial instruments are contracts which give rise to a financial asset of one entity and a financial liability or equity instrument of another. Financial Instruments Adjustment Account This account acts as a balancing mechanism for differences in statutory requirements and proper accounting practices for borrowings and investments. Finance lease When we lease goods using a finance lease we have most of the rights of ownership and take any profits and suffer any losses of ownership. Fixed asset A fixed asset is an asset which is intended to be in use for several years such as a building or a vehicle. General reserves These are amounts set aside for use in future years, not earmarked for any specific purpose. Heritage asset An asset with historical, artistic, scientific, technological, geophysical or environmental qualities that is held and maintained principally for its contribution to knowledge and culture. IFRIC The International Financial Reporting Interpretations Committee. International Financial Reporting Standards (IFRS) Accounting Standards, Interpretations and the Framework adopted by the International Accounting Standards Board (IASB). Impairment A reduction in the value of an asset from its previous value in the accounts. Infrastructure The infrastructure is made up of fixed assets such as roads and bridges. Intangible Assets are defined as identifiable non-monetary assets that cannot be seen, touched or physically measured, which are created through time and/or effort and that are identifiable as a separate asset. Inventories This is a term used for goods bought but which have not yet been used. Investment Property This is a separate class of property (land or a building, or part of a building, or both) that is held solely to earn rentals or for capital appreciation, or both. ISB Individual school budget. LASAAC Local Authority Scotland Accounts Advisory Committee.

http://en.wikipedia.org/wiki/International_Accounting_Standards_Board

http://en.wikipedia.org/wiki/Assets

157

LOBO Lender Option Borrower Option (Loans at market rates). Member A Councillor, a member of the Council. Minimum Revenue Provision (MRP) This is the amount we have to set aside out of our revenue to repay loans. Net Book Value (NBV) The value of an asset after depreciation. Net Operating Expenditure The net costs of services less net surplus on statutory direct-service organisations (organisations that have to follow special rules to provide our services), interest and investment income and transfers to and from the asset management revenue account. Non Operational Assets These are assets we hold but do not use to provide services. Examples are investments, and assets which are not yet in use. Non Distributable Costs Costs that cannot be specifically applied to a service or services and so are held centrally. Notional Fund This is where amounts that are transferred into a fund are done so for illustration only and do not actually involve incurring expenditure. Officer Employee of the Council. Operating lease When we lease goods using this type of lease, ownership of the goods remains with the lessor (the company leasing the goods to us) and the lessor takes the profits and suffers the risks of ownership. Operational asset These are assets we use to run our services such as buildings and vehicles. Payment in advance A charge taken into account when preparing the financial statements, which are for benefits to be received in a period after the accounting date. Precept This is an amount we receive from district and borough Councils in Northamptonshire (for Council Tax collected on our behalf) so that we can cover our expenses less our income. We also pay precepts to authorities such as the Environment Agency. Private Finance Initiative (PFI) A means of securing new assets and associated services, such as a new school or care home, from the private sector. Property, Plant and Equipment (PPE) Also known as a non-current asset or as Fixed Assets is a term used in accounting for assets and property which cannot easily be converted into cash. Provision Money set aside in a set of accounts for liabilities, which are known to exist, but which cannot be measured accurately at the date of the accounts. Public Private Partnership (PPP) A government service or private business venture funded and operated through a partnership of government and one or more private sector companies.

http://en.wikipedia.org/wiki/Accounting

http://en.wikipedia.org/wiki/Asset

http://en.wikipedia.org/wiki/Property

http://en.wikipedia.org/wiki/Cash

158

Public Works Loan Board (PWLB) A government body set up specifically to lend money to local authorities. PVEQ Plant, Vehicles and Equipment. Related Party/Parties This is a person or an organisation which has influence over another person or organisation. Reserves These are amounts set aside in one year’s accounts, which can be spent in later years. Some types of reserve can only be spent if certain conditions are met. Residual Pension Liabilities The outstanding cost of pension liabilities for employees that have left the Council. Revaluation Reserve This reserve records the accumulated gains on the fixed assets held by the authority arising from increases in value. Revenue Ongoing spending or income relating to the day to day activities of the organisation. SeRCOP Service Reporting Code of Practice. Issued by CIPFA. Local authorities are required to prepare their accounts in accordance with this. Service revenue account These are the services’ individual revenue accounts. SORP Statement of Required Practice. Straight line basis The reduction in the value of assets by an equal amount each year applied over the assumed life of the asset. Surplus The remainder after taking away all expenses from income. Transfer value When a pension scheme member moves their pension to another scheme, the transfer value is the amount of money transferred to the new scheme. The Code The Code of Practice on Local Authority Accounting in the United Kingdom (the Code) defines proper accounting practices for local authorities. Unitising Applying to the individual units (relating to members of the Pension Fund). Unrealised profit This is the anticipated profit that would be generated from selling the asset.

Draft NCC Statement of Accounts 2018-19 · The draft, unaudited accounts were issued 13 September...

Documents

Transcript of Draft NCC Statement of Accounts 2018-19 · The draft, unaudited accounts were issued 13 September...